Pre And Post Crisis Risk Disclosures And Financial Performance Of Islamic Banking Insitutions In Malaysia

by Azrina binti Muhammad Aznan

Abstract

The banking sector just like any other sectors operate with a certain degree of risks attached to to a certain extent. Following the Asian crisis that crippled the banking sector in ASEAN countries in 1997 to the recent US-subprime loan crisis in 2008, the study of risk and its management are being scrutinized and enhanced. This study focusing specifically on the banking sectors both the full-fledged Islamic and the conventional will examine the level of risk taking by each category of the banks. On top of that, another factor will be introduced that is on the risk-based disclosures approach that respective banks took in order to reassure its compliance to the regulators and in maintaining their customer base. These two factors are then introduced together and the effect that it has on the banks’ financial position will examined. 

The findings are that there is no clear association between disclosure and the measures of risks as highlighted by Hassan et al. (2011). The study also is supportive of Othman and Ameer (2009) findings on their study on whether the listed companies in Malaysian stock market comply with FRS132: Financial Instruments- Disclosure and Presentation for financial periods before and after 2006. The findings concur with their findings as the disclosures made concentrated more on interest rate or profit rate risk whilst credit risk was the least reported on both studies. 

It was evident there were some disparity among the sample banks. Some disclosed more than the other the findings both support and contradicts the earlier work by Ameer, Othman and Mahzan (2012). The findings is supportive of their findings that banks do followed the BNM guidelines as a means of self-regulations and used the risk reporting template as a part of their internal control by adopting a more selective approach when disclosing the information in their notes to the account.

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