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Article
Publication date: 27 July 2012

Muhamed Zulkhibri Abdul Majid

The purpose of the paper is to gauge the usefulness of the Monetary Condition Index (MCI) and Financial Condition Index (FCI) for the conduct of monetary policy in Malaysia.

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Abstract

Purpose

The purpose of the paper is to gauge the usefulness of the Monetary Condition Index (MCI) and Financial Condition Index (FCI) for the conduct of monetary policy in Malaysia.

Design/methodology/approach

The MCI is constructed as the weighted sum of changes in the exchange rate and interest rate from their levels in a chosen base year. The weights are obtained by summing up the coefficients on the lags variables from estimating the determinants of backward‐looking aggregate demand.

Findings

The paper finds that the movement inflation induces the movement in either interest rate or exchange rate. The result also indicates that the interest rate channel is found to be more powerful than the exchange rate channel. The method in determining the weights for each policy component of the index however indicates some degree of instability due to some external shock affected the exchange rate or the domestic short‐term interest rate.

Originality/value

In a small open economy with deregulated markets, it is crucial to assess the combined effect of interest rate and exchange rate on monetary conditions and the conduct of monetary policy. Despite the index ability to explain monetary conditions in Malaysia, the estimate of MCI and FCI should be used cautiously. The index does not offer a precise signal on the state of monetary condition in Malaysia.

Details

Journal of Financial Economic Policy, vol. 4 no. 3
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 28 June 2013

Farhana Ismail, M. Shabri Abd. Majid and Rossazana Ab. Rahim

The main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.

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Abstract

Purpose

The main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.

Design/methodology/approach

Data envelopment analysis (DEA) was initially used, to investigate the cost efficiency of the Malaysian banking sector and followed by Tobit regression analysis determine factors influencing the efficiency of Islamic and conventional banks in Malaysia.

Findings

The DEA results reveal technical efficiency as the main contributor of cost efficiency for conventional commercial banks and allocative efficiency as the main contributor for cost efficiency of Islamic commercial banks. This indicates conventional commercial banks have been efficient in utilizing information technology and electronics. Islamic commercial banks conversely have been efficient in allocating and utilizing their resources. Additionally, scale efficiency is found to be the main source of technical efficiency for both Islamic and conventional commercial banks, denoting that size is important in improving bank efficiency. The results of Tobit regression analysis are twofold. First, it documents capitalization and bank sizes are positively and significantly associated to efficiency. Secondly, loan quality is found to be negatively and significantly associated to efficiency.

Originality/value

This paper contributes to the body of knowledge through its literature discussions on the efficiency of both Islamic and conventional banks and the effect of banks' specific characteristics on their efficiency.

Details

Journal of Financial Reporting and Accounting, vol. 11 no. 1
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 13 February 2024

Noor Fadhzana Mohd Noor

This study aims to investigate the extent of Shariah compliance in wakalah sukuk and Shariah non-compliant risk disclosure in the sukuk documents and to analyse the risk…

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Abstract

Purpose

This study aims to investigate the extent of Shariah compliance in wakalah sukuk and Shariah non-compliant risk disclosure in the sukuk documents and to analyse the risk management techniques associated with the disclosed risks.

Design/methodology/approach

This study uses qualitative document analysis as both data collection and analysis methods. The document analysis acts as a data collection method for 23 wakalah sukuk documents selected from 32 issuances of wakalah sukuk from 2017 to 2021. These sukuk documents were selected based on their availability from relevant websites. Document analysis, both content analysis and thematic analysis, were used to analyse the data. Codes were grounded from that data through keywords search of Shariah noncompliant risk and its risk management. Besides these, interviews were also conducted with four active industry players, i.e. two legal advisors of wakalah sukuk, a wakalah sukuk trustee and a sukuk institutional issuer. These interview data were analysed based on categorical themes, on the aspects of the extent of Shariah compliance in sukuk, and the participant’s views on the risk management techniques associated with the risks or used in the sukuk documents.

Findings

Overall, the findings reveal three types of Shariah non-compliant risks disclosed in the sukuk documents and seven risk management techniques associated with them. However, the disclosure and the risk management techniques can be considered minimal in contrast to the extent of Shariah compliance in a sukuk, i.e. Shariah compliance at the pre-issuance stage, ongoing stage and post-issuance stage. On top of these, it was also found from the interviews that not all risk management techniques are workable to manage Shariah non-compliant risk in sukuk. As a result, these findings suggest rigorous reviews of the existing Shariah non-compliance risk (SNCR) disclosures and risk management techniques by the relevant parties.

Research limitations/implications

Sukuk documents used in the study are limited to corporate wakalah sukuk issued in Malaysia. Out of 32 issuances from 2015 to 2021, only 23 documents are available in relevant website. Thus, Shariah non-compliant risk disclosure and its risk management techniques analysed in this study are only limited in those documents.

Practical implications

The findings of this study suggest rigorous reviews on the existing Shariah non-compliance disclosures and risk management techniques. Other than these, future research in relation to uncommon risk management clauses, i.e. assurance, Shariah waiver and transfer of risk, are needed.

Originality/value

The insights presented in the analysis are of importance to sukuk issuers and the sukuk due diligence working group in enhancing the sukuk Shariah compliance and Shariah non-compliant risks disclosure and towards sukuk investors, in capturing and assessing Shariah non-compliant risks in a sukuk and to assist them to make informed investment decisions. More importantly, this study has found few areas of future study in relation to SNCR disclosures and SNCR risk management techniques.

Details

Qualitative Research in Financial Markets, vol. 16 no. 4
Type: Research Article
ISSN: 1755-4179

Keywords

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