State Ownership and Risk-Taking Behaviour: Evidence from Malaysia’s Banking Industry

Abstract

This study investigates state ownership on risk-taking behaviour in Malaysia’s banking industry. Using the panel of Malaysian commercial banks, this paper examines whether banks’ risk-taking is affected by Malaysian government ownership through the five largest investment arms of Malaysia (GLICs). The findings show that state-owned banks exhibit higher risk-taking behaviour compared to the private-owned banks in terms of loans. There is evidence that a higher degree of state ownership has a more significant impact on banks’ risk-taking behaviour. We also investigate the relationship with corporate governance mechanisms. The findings suggest that the composition of board of directors somehow plays a significant role in the governance of banks.

 

Published
2020-07-31
How to Cite
LEE, Ai-Xin; HOOY, Chee Wooi. State Ownership and Risk-Taking Behaviour: Evidence from Malaysia’s Banking Industry. International Journal of Banking and Finance, [S.l.], v. 15, n. 2, p. 65-94, july 2020. ISSN 1675-722X. Available at: <http://e-journal.uum.edu.my/index.php/ijbf/article/view/9381>. Date accessed: 20 sep. 2020. doi: https://doi.org/10.32890/ijbf2020.15.2.9381.