Bankruptcy Profile of Foreign versus Domestic Islamic Banks of Malaysia: A Post Crisis Period Analysis

Amin Jan and Maran Marimuthu
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Amin Jan: Universti Teknologi Petronas, Malaysia
Maran Marimuthu: Universti Teknologi Petronas, Malaysia,

International Journal of Economics and Financial Issues, 2016, vol. 6, issue 1, 332-346

Abstract: After the 2007-2008 subprime financial crisis considering bankruptcy evaluation for the banking industry becomes vital. In line of that, this study aims to analyze the bankruptcy profile of foreign versus domestic Islamic banks operating in Malaysia. This study predicted 40% and 75% bankruptcy in the subjected samples of foreign and domestic Islamic banks of Malaysia respectively. However, the specific reason behind this variation in their bankruptcy rates is tagged with the significant difference in their liquidity ratio that is, 1.59 by foreign and 0.41 by the domestic Islamic banks sample. The ANOVA results revealed that, the sample of foreign and domestic Islamic banks of Malaysia do differ significantly on bankruptcy rates as well as on the top bankruptcy's predictors namely liquidity, profitability, and insolvency. However, the sample does not vary on productivity with regards to bankruptcy exposure. Furthermore, the regression results revealed that, liquidity, profitability, and insolvency ratios in the sample of domestic Islamic banks, while only insolvency ratio in the sample of foreign Islamic banks have a significant positive relationship with bankruptcy in Islamic banking industry of Malaysia. Moreover, in the context of identified bankruptcy rates, the analysis here is viable to witness the sustainability ratings possessed by the sample of foreign and domestic Islamic banks of Malaysia.

Keywords: Bankruptcy; Sustainability; Foreign Islamic Banks; Domestic Islamic Banks; Financial Characteristics (search for similar items in EconPapers)
JEL-codes: A10 C01 C12 C33 C50 C53 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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