Off-Balance Sheet Income Activities for Islamic and Conventional Banks

Authors

  • Masturah Ma’in Senior Lecturer of Financial Economics, Faculty of Business & Management, Universiti Teknologi MARA (UiTM), 42300 Puncak Alam, Selangor, Malaysia
  • Latifah Syaqirah Misni Student of Arshad Ayub Graduate Business School, Universiti Teknologi MARA (UiTM), 40450 Shah Alam, Selangor, Malaysia
  • Siti Sarah Mat Isa Student of Faculty of Business & Management, Universiti Teknologi MARA (UiTM), 40450 Shah Alam, Selangor, Malaysia

DOI:

https://doi.org/10.24191/jeeir.v3i3.6414

Keywords:

off-balance sheet, bank-specific, macroeconomic factors, Islamic banks, Malaysia

Abstract

The aim of this study is to investigate the determinants of off-balanced sheet income activities, considering the bank-specific and macroeconomic factors as independent variables in Islamic and conventional banks in Malaysia. This study utilizes 16 Islamic banks and 14 conventional banks panel data from 2008-2013 and 2002-2013 respectively. The result shows that the determinants of off-balance sheet activities in Islamic banks in Malaysia are bank’s size (TA), bank’s profitability (NP), and interest rate (INT). While, the determinants of off-balance sheet activities in conventional banks are bank’s size (TA), bank’s profitability (NP) and the Real Gross Domestic Product (RGDP).

References

Aziz, Z. A. (2006). “Governor's speech at the 10th Malaysian Banking, Finance and Insurance Summit: Liberalisation and Consolidation of Malaysian Banking and Finance Sector: Enhancing Competitiveness & Resilience of Our Economy.” Online: http://www.bnm.gov.my/index.php?ch=en_speech&pg=en_speech_all&ac=218&lang=en [accessed October 25, 2013].

Baltagi, B. (2001). Econometric Analysis of Panel Data (2nd ed.). John Wiley and Sons: Chichester.

Bank Negara Malaysia. (2014). “BNM Annual Report: Banking sector posts pre-tax profit of RM29.8bil.” Online: http://www.thestar.com.my/Business/Business-News/2013/08/19/Banks-noninterest-income-may-come-under-pressure/?style=biz [accessed October 25, 2013].

Daljit, D. (2013). “Banks' non-interest income may come under pressure.” Online: http://www.thestar.com.my/Business/Business-News/2013/08/19/Banks-noninterestincome-may-come-under-pressure/?style=biz [accessed October 25, 2013].

DeYoung, R., & Rice, T. (2004). “Non-interest income and financial performance at US commercial banks.” Financial Review, 39(1), 101–127.

DeYoung, R., & Roland, K. P. (2001). “Product mix and earnings volatility at commercial banks: Evidence for a degree of total leverage model.” Journal of Financial Intermediation, 10(1), 54–84.

Edwards, F. R., & Mishkin, F. S. (1995). “The decline of traditional banking: Implications for financial stability and regulatory policy.” Federal Reserve Bank of New York Economic Policy Review, 1(2), 27–45.

Elian, M. (2012). “Determinants of off-balance sheet business in the case of GCC banking sectors.” International Journal of Banking and Finance, 9(3), 4.

Hahm, J. H. (2008). “Determinants and consequences of non-interest income diversification of commercial banks in OECD countries.” Journal of International Economic Studies, 12(1), 3–32.

Huang, L. W., & Chen, Y. K. (2006). “Does bank performance benefit from non-traditional activities? A case of non-interest income in Taiwan commercial banks.” Asian Journal of Management and Humanity Sciences, 1(3), 359–378.

Jacques, K., & Nigro, P. (1997). “Risk-based capital, portfolio risk and bank capital: A simultaneous equations approach.” Journal of Economics and Business, 49, 533–547.

Karim, M. A. Z., & Chan, S. G. (2007). “Off-balance sheet activities and performance of commercial banks in Malaysia.” ICFAI Journal of Financial Economics, 5(4), 67–80.

Khasawneh, A., & Hassan, K. (2010). “The determinants and policy implications of off balance sheet activities in MENA countries commercial banks.” Economic Research Forum, 2010.

Khasawneh, A. Y., Khrawish, H. A., & Khrisat, A. F. (2012). “The determinants of OBS activities in Jordan banking system: Panel data analysis.” European Journal of Economics, Finance and Administrative Sciences, (47).

Kim, J. G., & Kim, Y. J. (2010). “Non-interest income and financial performance at South Korea banks.” Online: http://www.apeaweb.org/confer/hk10/papers/kim_jingun.pdf [accessed October 25, 2013].

Kohler, M. (2013). “Does non-interest income make banks more risky? Retail-versus investment-oriented banks.” A Discussion Paper by Deutsche Bundesbank, No. 17/201. Online: http://econstor.eu [accessed October 25, 2013].

Lewis, M. K. (2013). “Off-balance sheet activities and financial innovation in banking.” Moneta e Credito, 42(165).

Ma’in, M., & Ismail, A. G. (2011). “Financial system design and firm investment in Malaysian listed firm.” Journal of Modern Accounting and Auditing, 7(1), 14–30.

Nachane, D. M., & Ghosh, S. (2002). “Determinants of off-balance sheet activities: An empirical analysis of public sector banks.” Economic and Political Weekly, 421–427.

Nachane, D. M., & Ghosh, S. (2007). “An empirical analysis of the off-balance sheet activities of Indian banks.” Journal of Emerging Market Finance, 6(1), 39–59.

Shahimi, S., Ismail, A. G. B., & Ahmad, S. B. (2006). “Panel data analysis of fee income activities Islamic banks.” Islamic Economics, 19(2), 23–35.

Stiroh, K. J. (2004). “Diversification in banking: Is non-interest income the answer?” Journal of Money, Credit, and Banking, 36(5), 853–882.

Downloads

Published

2015-09-30

How to Cite

Ma’in , M. ., Misni , L. S., & Mat Isa , S. S. . (2015). Off-Balance Sheet Income Activities for Islamic and Conventional Banks. Journal of Emerging Economies and Islamic Research, 3(3), 59–68. https://doi.org/10.24191/jeeir.v3i3.6414