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This paper aims to investigate the adequacy of regulatory capital funds through loss provisioning policies because of worsening credit quality associated with distressed financial conditions. A financial distress occurs when banks have difficulty in honoring financial commitments. This paper is expected to unveil how the provisioning mechanisms can address concerns associated with pro cyclicality of regulatory capital funds requirements, and how the banks behave in distressed financial conditions to share risks. The pro cyclicality of regulatory capital funds is the effect of various components of the financial system that aggravates the economic cycle such as during the expansion of the economy when banks are able to provide more loans and meet regulatory capital requirements with ease, while during the contraction of the economic cycle, can lead to deterioration of asset quality, and the resultant need to make loss provisions and recognize impairment. In turn, the situation puts further pressures on the capital requirements held by banks and their risk-sharing behavior. The paper analyzes a sample of Islamic banks in Malaysia.

By estimating credit risk-related information through loss provisioning policies, the paper uses an unbalanced panel data on all Islamic banks in the Association of Islamic Banking Institutions Malaysia from 2003 to 2014. The association consists of full-fledged Islamic banks and several foreign-owned entities.

The paper findings support that Islamic banks during observed period of distressed financial conditions were less discouraged to increase their regulatory capital funds to share risks. Intuitively, they were more encouraged to engage in risk-shifting behavior. Also, the risk-shifting behavior was found to have a significantly high potential in foreign-owned Islamic banks than in domestic Islamic banks.

Although the study is based on a sample of Islamic banks in Malaysia, the findings suggest targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing.

The outcome of this paper has practical implications for Islamic banks to build a buffer of capital funds to face downward pressures during heightened financial uncertainties while serving as protection to depositors. Moreover, this study has practical implications for shareholders to avail themselves the benefits of high investment accounts financing. The Islamic banks can continue to play their role in promoting inclusive growth, reducing inequality and accelerating poverty reduction.

Although the current study is based on a sample of Islamic banks in Malaysia, the finding suggests that the extent of risk shifting was significantly more incentivized among the foreign-owned rather than the domestic Islamic banks. This information can be used to develop targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing.

This paper is the first that investigates on adequacy of regulatory capital funds of Islamic banks through loss provisioning policies.

This paper aims to derive determinants of loan loss provisions (LLPs) of commercial banks in Malaysia.

A single-stage panel data analysis multiple regression model that contains a mixture of quantitative and qualitative elements is used. The LLPs is a dependent variable or regressor, and non-performing loan (NPL), interest income, net profit, loans and advances and gross domestic product (GDP) are the independent variables or regressor/explanatory variables. The moderating variable is “credit risk management” (CRM) and the intervening variable is “relevance and faithful representation”.

This paper suggests in LLPs, NPLs, interest income, loans and advances, net profit and GDP, as well as the moderating effect of CRM and the intervening effect of relevance and faithful representation, are determinants of the LLPs. The moderating variable CRM strengthens the relationship between the independent variables and the dependent variable. The intervening variable “relevance and faithful representation” brings about a more accurate reporting on the levels of the LLPs.

The association of the factors is investigated further to detect possible effect of multicollinearity and research to better understand how banks manage their risk as the current investigation is limited to banks in Malaysia.

Loan loss provisioning issues of commercial banks in Malaysia are challenges for both regulators and the banking industry owing to the implementation of several new measures, the convergence with internationally accepted accounting standards and differences in loan grading and applications of different loan loss provisioning standards. Because of these challenges, Bank Negara Malaysia (the Central Bank of Malaysia) has tightened its supervision of commercial banks to ensure that banks are sufficiently and adequately provisioned. The banking sector plays a significant role, and it is important that it is resilient in the face of potential sources of systemic risk. And, like in other major ASEAN economies, the Malaysian’s financial system remains largely bank-dominated.

This study discovers whether Malaysian banks are sufficiently provisioned for the regional financial integration under the ASEAN Capital Markets Forum (ACMF) by the end of 2015, where several initiates have been initiated, including the harmonization of standards to encourage greater intra-regional investment flows and transactions and continued provisions of the much needed funds by the region’s private sectors.

In this research, arbitrage opportunity is tested between the yield rates computed by the NSS model, and the computed forward rates between conventional and Islamic finance to see any arbitrage opportunity. The research questions are the conventional and Islamic finance yields at the same level and equal to each other to avoid arbitrage? Whether conventional and Islamic forward rates differ significantly and thus create any arbitrage opportunity. This study aims to find the presence or absence of arbitrage between conventional and Islamic finance yield rates.

The NSS model is the latest model in calculating yield and forward rates. In the method the error level is minimized so expected yield rate and given yield rate both converged (Vahidin and Anastasios, 2020). When they converged it gives the researchers all six months’ yield rates. For the Nelson Siegal method, all the six months’ yield rates are available and these yield rates can be used to compute the forward rates.

The authors concluded there is a significant difference between the conventional yield rate and the Islamic yield rate. It suggests that because there are significant differences, its suggest arbitrage is possible. So anyone interested in making a guaranteed profit. The conventional yield rates are lower; hence, anyone can borrow from the conventional finance system and invest the money in the Islamic financial system because investments are getting higher rates of income in the form of yield rate in Islamic Finance. So, one can make money because of this difference. Statistically, it is possible to make money, but practically, the authors observed the difference, however it is very meager. The arbitrage opportunity between Islamic finance and conventional finance will not affect the economy because the significant difference is too small. The disturbance in the arbitrage opportunity due to the values is very meager and insignificant.

This research does not address the derivative contracts’ role in risk management; future researchers could take up this as another research.

This research will be beneficial for financial institutions, especially institutional investors. Besides, this research will help the regulators and investment bankers in assisting where and future losses especially bond portfolios in conventional finance and Islamic finance. This study will also contribute and help the asset manager of mutual funds in the mutual fund industries.

In effect, this research will strengthen the financial system, capital market and bond market, derivative contracts such as options contracts, futures contracts, swap contracts and forward contracts will use computed forward rates for assessing future losses (value at risk [VaR]) and to hedge them (Balakrishnan, 2020).

As this topic is rarely studied it will increase the literature present in this domain.

The purpose of this paper is to postulate, in addition to “moral” and “strategic” considerations, a third general standard for corporate social responsibility (CSR). That third approach is what moral philosophers call “virtue ethics.”

This paper uses a single organization case study of a Malaysian publisher to put forward the practice of virtuous CSR based on Islamic values and principles in a family business.

By focussing on creating or maintaining virtuous habits in the family and the firm, the family business has avoided the equally unrealistic notions that CSR must be entirely selfless or entirely strategic to be legitimate. Virtues that foster a successful strategy such as vision and competence can be enhanced rather than hindered by virtues such as integrity and generosity.

This is a case study of a single family. Nevertheless, this paper has implications for strategy and CSR for non-family business as well because it brings into the discussion virtue ethics which is largely absent from popular ethical discourse in the West, including popular discourse about business ethics and CSR.

While moral and strategic interests merit consideration, virtue is often the most important concern of all. Virtuous CSR aims to improve or at least preserve the character and the soul of the family and its enterprise.

This paper shows that in family business moral freedom and CSR do not have to be purchased at the expense of an effective business strategy. Paradoxically, an effective business strategy may be partly non-strategic and partly non-business – i.e. partly focussed on virtue. Further research may show that family business can be a leader in CSR, teaching managerial techniques to non-family business.

The lack of a direct link between business value and sustainability is a critical roadblock to truly embedding sustainability in business strategies. Before launching the sustainability journey, every organisation should answer the question: “What value would this strategy offer our organisation?” Conversely, when organisations are opportunistic toward quick profits, the negative consequences of one domain spill over to another. The desire to produce more may result in overproduction, overconsumption or environmental pollution.

To give a complete analysis of sustainable capabilities, this study combines current theoretical understanding from past literature, followed by exploratory interviews and a thorough case study. The case study ventured into uncharted territories, unveiling an exciting new sphere of value catalysed by the mechanisms of sustainable co-creation. Additionally, it exposed thought-provoking motives driving supply chain actors’ unwavering commitment to ethical decision-making, even amidst towering challenges.

Our empirical lens reveals the hidden mechanics of resource sharing and the genesis of newfound value, illuminating previously obscure corners of the sustainability field. Moreover, it sheds light on retailers striving to cultivate green retail supply chains. It delivers an actionable framework that bolsters business sustainability and fuels competitive edge, which is vital in the rapidly evolving landscapes of emerging economies.

This study offers insights into the sustainable value-creation mechanism in ALPHA, a Malaysian retailer, uncovering how supply chain actors’ business activities generate economic, social and environmental performance.