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The effect of financial liberalization towards the financial stability of Islamic banks in Malaysia

Muhamad Arifin, Nur Afizah and Mohd Arifin, Noraini and Ramly, Zulkufly and Mohd Hashim, Maryam Jameelah and Abdul Aziz, Nor Farradila and Kamaralzaman, Surianor (2020) The effect of financial liberalization towards the financial stability of Islamic banks in Malaysia. Advances in Business Research International Journal, 6 (2). pp. 62-68. E-ISSN 2462-1838

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Financial liberalization will affect the stability of the financial system due to excessive risk. Liberalization effort in Islamic banks players raises the issues of the ability of how Islamic banks can survive in the financial liberalization regime. Financial liberalization induced competition and thus impact on financial stability due to excessive risk taking. Malaysia is operating in dual financial system, the effect of mediating roles of competition and interest rate between financial liberalization is expected to vary to some extent due to shariah constraint. This paper aims to analyze the effect of financial liberalization and financial stability. Structural equation model – Partial least square (PLS-SEM) is used to analyze the research model with a comprehensive data set covering the Islamic banks over 1994 -2017. The empirical results denote a significant negative impact of financial liberalization on Islamic banks' financial stability in Malaysia. Lastly, it can be concluded that this study has an implication for policymakers and the banking industry

Item Type: Article (Journal)
Additional Information: 7002/85539
Uncontrolled Keywords: Financial liberalization, financial stability, Islamic banks, Malaysia
Subjects: H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Kulliyyah of Economics and Management Sciences
Kulliyyah of Economics and Management Sciences > Department of Finance
Depositing User: Dr Zulkufly Ramly
Date Deposited: 03 Dec 2020 16:09
Last Modified: 03 Dec 2020 16:09
URI: http://irep.iium.edu.my/id/eprint/85539

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