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Volume 9 Number 3, 2019 (Special Issue,  Universiti Kebangsaan Malaysia)

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The Relevance of Foreign Ownership on Credit Risk Among Islamic Banks in Malaysia (Hafizuddin-Syah, Hawati Janor, Rubayah Yakob)

Bank’s credit risk is mostly rooted by loan and financing transactions. However, other factor such as type of ownership could also decisive driving force of credit risk. For instance, foreign-owned bank is vulnerable to credit risk than local-owned bank due to wider exposure from the parent foreign bank. As past studies were mainly focus on the conventional bank, this study examines the effect of foreign ownership on credit risk among Islamic banks in Malaysia. Results from panel data regression on a sample of 16 Islamic banks shows that foreign-owned Islamic banks in Malaysia carry more credit risk than local-owned banks. Furthermore, loan loss provision, regulatory capital and banks’ size are positively related to credit risk. These findings enrich the on-going debates on the driving forces of bank’s credit risk. It also provides useful insight for the risk management of local-owned Islamic banks in Malaysia for strategic decision making.

Board of Directors Characteristics, Organization Structure and Cooperative Performance(Suraiya Ishak, Ahmad Raflis Che Omar, Abdullah Sanusi Othman, Sarmila Md Sum, Juliza Jaafar)

Board of director characteristics are significant determinant to firm performance. While extant research has explored the effects of board of directors on firm performance, few studies have examined the factors on the cooperative performance. This study aims to investigate the relationship between board characteristics, organization structure and cooperative performance.   The survey is conducted on the target respondents that consist of representative of the palm oil smallholders’ cooperatives board members inclusive of Chairman, Secretary, Treasurer and Managers. The relationship between dependent and independents variables are validated through the Partial Least Square (PLS) analysis.  The findings indicate that organization structure represented by the establishment of specific bureaus and board members gender dominance has significant positive relationship with the financial and non-financial performance indicators.  The study provides a foundation that explicates key factors that influence palm oil smallholders’ cooperative performance.

Sustainability of ASEAN Monetary Integration (Noor Azryani Auzairy, Lim Chia Syin, Teddy Van Eijk, Alixieng Changchern)

This paper is to examine the sustainability of a monetary integration among the ten Association of Southeast Asian Nations (ASEAN) countries. This is to ensure of the sustainability, stability and cooperation of this regional monetary integration. The analysis is based on the required set of criteria for sustainable convergence of European Monetary Institute, which include price stability, government budgetary position, exchange rate stability and long-term interest rate. The findings indicate that some additional efforts and better policies are needed to be in place to strengthen the level of sustainability and integration among the ASEAN countries. The results give detailed relationships between and among the countries in the region in order to assist the authorities and the MNCs of the ASEAN countries and other Asian economies in considering the idea(s), policy and action(s) of having sustainable monetary and business integration in the region.

Information Gap in Corporate Occupational Safety and Health Disclosure (Mara Ridhuan Che Abdul Rahman, Maizatulakma Abdullah, Mazni Yahya)

This study examined the views of trade unions on the disclosure of occupational safety and health (OSH) information and investigated whether the OSH information disclosed in companies’ annual reports fulfils the trade unions’ expectations. A mixed research method combining qualitative and quantitative approaches was used, and 472 questionnaires were sent to respondents consisting of trade unions in Malaysia’s private sector to gauge their views on OSH information. Results showed that the trade unions agreed that OSH information should be disclosed by companies. Content analysis on 40 companies’ annual reports indicated that OSH information disclosure remains low. T-test analysis revealed the presence of a significant OSH information gap between trade unions and companies. This study contributed to existing literature by assuming a new perspective into OSH information studies, that is, the perspective of trade unions. These findings help companies and authority bodies improve the quality of OSH information disclosure to various stakeholders.   

Re-Aligning the Needs of Manpower for the Vision 2020: The Case of the Manufacturing Sector in Malaysia (Noorasiah Sulaiman, Rahmah Ismail)

The employment growth and the number of person employed in the manufacturing sector have decreased more than a decade ago. To position this sector in the right track of sufficient workers and to minimize the problem of skills mismatching, the need for the manpower required should be re-aligned in terms of job and skill needed. Using the Manpower Requirement Approach, this study aims to (1) project the manpower requirement by the manufacturing sub-industries for the year 2020; and (2) project the manpower requirement by skills for the particular jobs. The findings reveal that machinery and equipment industry has the largest number of employment, follow by rubber and plastics industry. Most industries highlighted that low-skilled labor have a largest of job skill needed. These findings suggest that this sector should move from capital intensive, so that, relying on low skills labor can be reduced as the number of employment of this sector would significantly drop in the future.

Relationship between Distributive Fairness in Remuneration Systems and Organizational Affective Commitment with Trust in Supervisors as Mediator (Fatmawati Abdin, Azman Ismail, Nur Sa’adah Muhamad)

Distributive fairness is a vital consideration in designing and administering creative remuneration systems because it may strongly inspire employees to support their organizations’ strategy and goals. Hence, this study is undertaken to evaluate the relationship between distributive fairness in remuneration systems and organizational affective commitment, with trust in supervisors mediating the relationship. Data were gathered from the questionnaires filled by the employees who work at a government-owned audit agency in Malaysia. Results of Statistical Package for Social Science (SPSS) displays that relationship between distributive fairness in remuneration systems and trust in supervisors has a positive and significant association to organizational affective commitment. The finding confirms that effect of distributive fairness in remuneration systems on organizational affective commitment is mediated by trust in supervisors. Further, implications from this study and suggestions for future study are elaborated.

Impact of Perceived Socially Responsible-HRM Practices on Employee Deviance Behavior (Zainab Ali Rawshdeh, Zafir Khan Mohamed Makhbul, Najeeb Ullah Shah,  Perengki Susanto)

This study examines a mediated-moderation model for how perceived socially responsible-HRM practices influence workplace deviance. The authors hypothesized that SR-HRM Practices increase employee’s organizational trust, which in turn decrease their deviant behaviors. The authors further predicted that ethical leadership strengthen such indirect effect of SRHRM practices on employee’s deviant behavior. Using a survey of 420 employees in Klang Valley area in Malaysia, the analysis was carried out using partial least square structural equation analysis (PLS-SEM). The results indicate that SR-HRM practices has indirect effect on deviant behavior. The indirect effect of SRHRM practices advocates improving organizational trust, which in turn, engenders desisting from deviant behaviors, whereas ethical leadership was found to moderate the SR-HRM – organizational trust relationship, such that this relationship was stronger when ethical leadership was high. The implication for researchers and practitioners is discussed.

Religion and Social Entrepreneurship: A Cross-Country Analysis (Abu H. Ayob, Wan Mohd Hirwani Wan Hussain)

Religious affiliation represents a substantial component of a country’s social landscape. Although research has examined the effect of religion on various economic affairs, the potential relationship with social entrepreneurship remains unexplored. In this study, we attempt to provide empirical evidence that links the major religion and the rate of social entrepreneurship across 55 countries. Together, we test whether or not the importance of religion and secularism explains participation in social entrepreneurship. The findings show that social entrepreneurship is more prevalent in Catholic and Atheist-majority but not in Protestant or Muslim-majority countries. However, the importance of religion and secularism do not further delineate engagement in social entrepreneurship. This research sheds light the subtle role of religion on collective participation in social entrepreneurship.  

Credit Risk Determinants: A Systematic Review for Islamic and Conventional Banks (Nur Farani Rosli, Aisyah Abdul-Rahman, Syajarul Imna Mohd Amin)

The study identifies the credit risk determinants for conventional and Islamic banks. The initial systematic literature review found a total of 120 research articles from Web of Science (WoS) and SCOPUS; however finally end up to 80 after the screening on credit risk determinants have been precisely reassessed. The review findings show that previous studies divided factors affecting credit risk into two categories, namely, macroeconomic and bank-specific variables. The result discovers that macroeconomic (economic status, interest rate, money supply, inflation, exchange rate, financial crisis, unemployment, public debt, competition, and export and import) and bank-specific determinants (size, loan growth, financing structure, profitability, inefficiency, capital, leverage, ownership structure, bank age, liquidity, collateral, non-performing financing, loan loss provision, diversification, and deposit insurance coverage) play a crucial role in influencing credit risk. Additional significant factors for Islamic banks are Shariah supervisory board, Islamic banking contract, interbank rates, and governance of a country.

Indonesian Shareholder's Political Motives and Companies' Effective Tax Rate(Mohd. Rizal Palil, Suryo Utomo, Romlah Jaffar, Rosiati Ramli, Lokhman Hakim Osman, Mohd Helmi Ali, Nor Hazila Mohd Zain, Puji Handayati)

Many corporate shareholders actively participated in their country’s political arena. In order to maintain their political activities, they need easy, cheap and large sources of funds. Since companies’ Effective Tax Rate (ETR) and shareholder’s political motives are attached to two different entities, it seems practically impossible to measure the direct relationship between the variables. This paper examines the relationship between shareholder’s political motive and companies’ ETR using the Fraud-Risk Theory framework. This study employs a unique panel data of Indonesian companies during 2004 and 2014. A total of 252 entities, comprising 2772 firm-year observations, were analyzed. Results from multivariate data analysis support the notion that there is significant negative relationship between the two variables under study. This study concludes that shareholder’s political motive is negatively related to corporate tax compliance level, and shareholder’s political motive can be considered as a factor that has significant negative influence on ETR.