Market Risk and Efficiencies of the Malaysian Banking Industry: The Post-merger and Acquisition

Abstract

This paper examines the effects of cost and profit efficiencies on post-merger bank market risk. We use Stochastic Frontier Analysis to estimate cost and profit efficiencies, and Value at Risk and Expected Shortfall to calculate the market risks. We measure the effects in panel analysis using data from banks listed on the Bursa Malaysia over the 2000-2015 period. The results show that the post-merger banks can sustain the market risk exposure from the global financial crisis. The increase in cost and profit efficiency increase the market risk. The findings could be used for the bank regulators and managers to focus on the efficiency-related initiatives to manage the market risk better.

SYSTEMIC RISK’s effect ON THE STABILITY OF THE BANKING SECTOR: EVIDENCE FROM SAUDI ARABIA

“…To determine the optimal lags length for the two study models, the Akike Info Criterion (AIC) is used, where the model is chosen in which the value of the criterion is the lowest. The following figures show that the two best models are ARDL(4,2,1,3,2) for model (1) and ARDL(4,0,4,4,0) for model (2).…”

“…The results in the model(1) indicate that the total banking assets in the Saudi Arabia are affected by its previous values and the current and previous values of the explanatory variables. The results of the model(2) indicate that total deposits are not affected by its previous values, but affected by current and previous values of interest rates, oil prices and political instability during the years of war in Yemen. The results also indicate that the error correction parameter 𝐸𝐶𝑀 𝑡−1 fulfils the conditions indicating the existence of a valid co-integration relationship, as we found it a negative and significant value.…”

Challenges of Islamic Bank Merger in Indonesia: Bocr Approach

“…Besides that, this bank merger will be able to stabilize individual banks and reduce risk (Hassan & Giouvris, 2021). The post merger banks can sustain the market risk exposure from the global financial crisis (Ab-Hamid et al, 2018) However, another opinion was put forward by (Yusuf & Raimi, 2019) that independent banks outperform merged banks. Likewise, a study conducted by (Kandil & Chowdhury, 2014) that mergers and acquisitions of Islamic banks have a negative effect on the performance of Islamic banks in the long term.…”