Financial Liberalization, Reforms and Bank Performance: Evidence from Malaysian Islamic Banks

Abstract

The regulatory reforms implementing by Malaysian government since 2010 have been enhancing the performance of Islamic banks. The purpose of this research is to provide empirical evidence concerning the impacts of liberalization and reforms on Islamic bank's performance in Malaysia. The posited hypothesis is there is significant relationship among? between financial liberalization, regulatory reforms and Islamic banks performance in Malaysia. Datum were collected from 16 Islamic banks. Online statistical datum used in this study were extracted from Bank Negara Malaysia (BNM), World Bank, IMF and financial report of the selected banks, we considered annual datum from 2002 until 2012. To test our hypotheses, we used panel regressions model to investigate the relationship between the Islamic banks performance and financial liberalization and reforms, although its relation with return on assets and equity on return was measured by Z-score. The findings indicate that financial liberalization and openness, assets, profitability, return on assets and inflation have statistically positive impacts on Islamic banks performances.