Dharvintharan Konasilan1 and Logasvathi Murugiah2
1Msc. Banking, OYAGSB, Universiti Utara Malaysia (This email address is being protected from spambots. You need JavaScript enabled to view it.)
2School of Economics, Finance and Banking, Universiti Utara Malaysia (This email address is being protected from spambots. You need JavaScript enabled to view it.)
ABSTRACT
The bank, which is a financial institution, plays an important role in Malaysia. In order to ensure connectivity, the banking sector explores technology as market demand increases. In early 2000, banks started to develop new banking instruments using new innovative technology innovation and connectivity. Technology in the banking sector offers cost saving opportunities, expand productivity and reduces operational risk compared to traditional banking. Nevertheless, this result does not reflect the situation in some less developed countries because merge infrastructure investment and customers' preference towards the traditional banking method in their country. Hence, this study aims to investigate the bank's internal, macroeconomic and technology factors and their relationship with Malaysian commercial banking performance. Secondary data were collected from eight local commercial banks that acted as samples of this study and the data is collected over a period of 12 years (2005 to 2017 with 84 observations). Data went through the descriptive analysis, correlation analysis, assumption testing and Ordinary Least Square (OLS) regression analysis using the SPSS software in order to achieve the research objectives. Findings show that bank internal factors consisting of bank size, credit risk, and capital adequacy play a significant role in a bank's performance. It also indicated that there is a significant relationship between technology and bank performance. This shows that banks are certainly affected by technology innovation, which indicates that banks have to make clear strategic plans to observe sustainability in this sector and improve their performance.
Keywords: ROE; Commercial banks; Technology; Regression and Malaysia.