Factors affecting the financial performance of Malaysian banks

This paper aim to study the different factors affecting the financial performance of Malaysian banks by examining the relationship of credit risk, liquidity, operating efficiency and size, to the financial performance. A five-year period study was conducted that is from 2011 to 2015. Data were extracted from the annual reports of
banks and included information from the income statement, balance sheet and notes to the accounts published in websites of the banks. The study covered 33 commercial banks including local and foreign owned conventional and Islamic banks. Statistical Package for the Social Sciences were used to analyse the data, and normality tests included the Shapiro-Wilk’s test and Kolmogorov-Smirnov test as well as skewness
and kurtosis tests. Multiple regression has been used to determine relationship between the variables. The findings of the study shows a significant positive relationship between liquidity, size and operational efficiency and financial performance, whereas credit risk and financial performance shows a positive
relationship. The results of this study are useful for depositors, bank managers,
shareholders, investors, regulators and academician because its show the current economic situation and the recent financial condition of the banks. In addition, for a
tax authority point of view, this study provides a basis for determining cases and issues
upon which to focus in the auditing banking industry.