FINANCIAL TECHNOLOGY, NON PERFORMING LOAN RATIO, BANK SIZE ON BANK STABILITY: EVIDENCE FROM MALAYSIAN LISTED BANKS
DOI:
https://doi.org/10.35631/AIJBES.829076Keywords:
Bank Size, Bank Stability, Financial Technology, Non Performing Loan RatioAbstract
This study investigates the effects of FinTech, non performing loan ratio and bank size on the case of stability in banks. This research work utilizes secondary data derived from listed Malaysian banks for a period extending from 2010 to 2024. The Z-score is used as a measure of banking stability, while non-interest operating costs are taken as a proxy for FinTech adoption. Non performing loan ratio (NPL) and bank size, are also employed as the independent variables. The analysis of the relationships among the variables is performed using STATA. The results implicate that FinTech adoption and non performing loan ratio have a negative yet insignificant correlation with bank stability, while Bank Size has a negative and significant correlation with stability. This finding indicates that larger banks may reduce its stability due to operations cost and risk exposure. Thus, the banks manager should might tightening is liquidity and risk control to ensure the bank’s stability in the long run and it may give signal to investors on the firm value and impact their financial decision.
Downloads
References
Adusei, M. (2015). The impact of bank size and funding risk on bank stability. Cogent Economics & Finance, 3(1), 1111489. https://doi.10.1080/23322039.2015.1111489.
Afroj, F. (2022). Financial strength of banking sector in Bangladesh: A CAMEL framework analysis. Asian Journal of Economics and Banking, 6(3), 353–372. https://doi.org/10.1108/ajeb-12-2021-0135
Ali, M., & Puah, C. H. (2018). Does bank size and funding risk effect banks’ stability? A lesson from Pakistan. Global Business Review, 19(5), 1166-1186. https://doi.10.1177/0972150918788745.
Alsartawi, A. M. (2024). The diffusion of financial technology-enabled innovation in GCC-listed banks and its relationship with profitability and market value. Journal of Financial Reporting & Accounting. https://doi.org/10.1108/jfra-01-2024-0010
Anh, N. Q., & Phuong, D. N. T. (2021). The impact of credit risk on the financial stability of commercial banks in Vietnam. Ho Chi Minh City Open University Journal of Science - Economics and Business Administration, 11(2), 67–80. https://doi.10.46223/HCMCOUJS.econ.en.11.2.1421.2021
Badran, J., & Chamoun, M. (2024). Corporate governance and banking stability in the MENA region. International Business Research, 17(2), 31. https://doi.org/10.5539/ibr.v17n2p31
Baharin, R., & Fazli, K. F. (2024). Impact of FinTech investment towards banks’ performance in Malaysia, Indonesia and Thailand. International Journal of Academic Research in Business and Social Sciences, 14(8). https://doi.org/10.6007/ijarbss/v14-i8/20424
Baker, H., Kaddumi, T. A., Nassar, M. D., & Muqattash, R. S. (2023). Impact of financial technology on improvement of banks’ financial performance. Journal of Risk and Financial Management, 16(4), 230. https://doi.org/10.3390/jrfm16040230
Bank Negara Malaysia. (2026). Annual Report 2025. https://bnm.gov.my/AR2025
Banna, H., Hassan, M. K., & Rashid, M. (2021). FinTech-based financial inclusion and bank risk-taking: Evidence from OIC countries. Journal of International Financial Markets, Institutions and Money, 75, 101447. https://doi.org/10.1016/j.intfin.2021.101447
Bueno, L. A., Sigahi, T. F. A. C., & Anholon, R. (2023). Digital banks in Brazil: Struggling to reach the breakeven point or a new evolution wave? FinTech, 2(3), 374–387. https://doi.org/10.3390/FinTech2030021
Dasilas, A., & Karanović, G. (2023). The impact of FinTech firms on bank performance: Evidence from the UK. EuroMed Journal of Business. https://doi.org/10.1108/emjb-04-2023-0099
De Boyrie, M. E., & Pavlova, I. (2025). Bank acquisitions of AI and FinTech: Impact on performance. Managerial Finance. https://doi.org/10.1108/mf-04-2024-0314
Demirguc-Kunt, A., & Klapper, L. (2012). Measuring financial inclusion: The Global Findex database. World Bank Policy Research Working Paper. https://doi.org/10.1596/1813-9450-6025
Dilla, S., Zainir, F., & Shahrin, A. R. (2025). Does FinTech lending moderate the competition-efficiency nexus in banking? Journal of Chinese Economic and Foreign Trade Studies. https://doi.org/10.1108/jcefts-05-2024-0032
Elia, G., Stefanelli, V., & Ferilli, G. B. (2022). Investigating the role of FinTech in the banking industry: What do we know? European Journal of Innovation Management, 26(5), 1365–1393. https://doi.org/10.1108/ejim-12-2021-0608
FinTech News Malaysia. (2025, May 13). Does Malaysia have what it takes to reinvent Islamic finance? https://FinTechnews.my/50516/digital-banking-news-malaysia/does-malaysia-have-what-it-takes-to-reinvent-islamic-finance/
FinTech Statistic. (2024, November 13). Consumer trust in FinTech: Key statistics you need to know. https://FinTechstatistics.com/2024/11/13/consumer-trust-in-FinTech-key-statistics-you-need-to-know/
Hidayat-Ur-Rehman, I., & Hossain, M. N. (2024). The impacts of FinTech adoption, green finance and competitiveness on banks’ sustainable performance: Digital transformation as moderator. Asia-Pacific Journal of Business Administration. https://doi.org/10.1108/apjba-10-2023-0497
Iqbal, M., Hakim, L., & Aziz, M. A. (2024). Determinants of Islamic bank stability in Asia. Journal of Islamic Accounting and Business Research. https://doi.org/10.1108/jiabr-07-2022-0174
Islamic Financial Services Board. (2024). Islamic financial services industry stability report 2024. https://www.ifsb.org/wp-content/uploads/2024/09/IFSB-Stability-Report-2024-8.pdf
Khalifaturofi’ah, S. O. (2021). Cost efficiency, innovation and financial performance of banks in Indonesia. Journal of Economic and Administrative Sciences, 39(1), 100–116. https://doi.org/10.1108/jeas-07-2020-0124
Kurniawati, D. T., Fernando, Y., W, M. A. D. I., & Masyhuri, M. (2024). Financial technology readiness for Shariah-compliant banking services: Post-merger perspectives. Journal of Islamic Marketing, 15(6), 1651–1671. https://doi.org/10.1108/jima-08-2023-0236
Liu, A., Urquía-Grande, E., López-Sánchez, P., & Rodríguez-López, Á. (2022). Research into microfinance and ICTs: A bibliometric analysis. Evaluation and Program Planning, 97, 102215. https://doi.org/10.1016/j.evalprogplan.2022.102215
Mohamed, M., Rahhim, A. S. B. A., Azlan, N. E. B. K., & Aziz, F. (2023). Disruptive Expansion of FinTech: Recognizing the merits and demerits of Islamic Banking. International Journal of Academic Research in Business & Social Sciences, 13(6). https://doi.org/10.6007/IJARBSS/v13-i6/16871
Nguyen, L., Tran, S., & Ho, T. (2021). FinTech credit, bank regulations and bank performance: A cross-country analysis. Asia-Pacific Journal of Business Administration, 14(4), 445–466. https://doi.org/10.1108/apjba-05-2021-0196
Oladapo, I. A., Hamoudah, M. M., Alam, M. M., Olaopa, O. R., & Muda, R. (2021). Customers’ perceptions of FinTech adaptability in the Islamic banking sector: Comparative study on Malaysia and Saudi Arabia. Journal of Modelling in Management, 17(4), 1241–1261. https://doi.org/10.1108/jm2-10-2020-0256
Omar, E. E. F., & Ibrahim, A. A. H. (2025). The impact of financial technology on bank’s performance in Egypt: The moderating role of COVID-19 pandemic. Journal of Financial Reporting & Accounting. https://doi.org/10.1108/jfra-09-2024-0615
Pham, H., Hong, T. N. V., Le, H., & Bui, M. (2023). The effects of FinTech on the banking sector: Evidence from China and Vietnam. In Emerald Publishing Limited eBooks (pp. 279–292). https://doi.org/10.1108/978-1-80262-277-520231020
Rahman, A. A. A., Rahiman, H. U., Meero, A., & Amin, A. R. (2023). FinTech innovations and Islamic banking performance: Post-pandemic challenges and opportunities. Banks and Bank Systems, 18(4), 281–292. https://doi.org/10.21511/bbs.18(4).2023.23
Ross, S. A. (1977). The determination of financial structure: the incentive-signalling approach. The bell journal of economics, 23-40. https://doi.org/10.2307/3003485
Salim, A. S., Zain, S. N. M., Ramli, M. A. R., & Haleem, M. H. S. M. (2026). Factors Influencing Asset Growth of Islamic Banking in Malaysia Post Islamic Financial Services Act 2013. In The Future of Work: How Technology is Transforming Jobs and Skills (pp. 769-779). Cham: Springer Nature Switzerland.
Salman, K. R., Sutisna, E., & Khasanah, J. S. N. (2025). The effect of FinTech innovation on Islamic bank efficiency through capital and liquidity. Journal of Islamic Accounting and Business Research. https://doi.org/10.1108/JIABR-09-2024-0330
Shaikh, I. M., Qureshi, M. A., Noordin, K., Shaikh, J. M., Khan, A., & Shahbaz, M. S. (2020). Acceptance of Islamic financial technology (FinTech) banking services by Malaysian users: An extension of technology acceptance model. Foresight, 22(3), 367–383. https://doi.org/10.1108/fs-12-2019-0105
Shehadeh, M., Ahmed, F., Hussainey, K., & Alkaraan, F. (2024). Nexus between corporate governance and FinTech disclosure: A comparative study between conventional and Islamic banks. Competitiveness Review: An International Business Journal. https://doi.org/10.1108/cr-05-2024-0089
Sivarajan, L. S., Alyasa-Gan, S. S., Che-Yahya, N., & Salehuddin, S. (2023). Explaining Non-Performing Loans of Commercial Banks in Malaysia. Advances in Social Sciences Research Journal, 10(6.2), 98-106. https://doi.10.14738/assrj.106.2.15014.
Spence, M. (1978). Job market signaling. In Uncertainty in economics (pp. 281-306). Academic Press. https://doi.org/10.2307/1882010
Trad, N., Rachdi, H., Hakimi, A., & Guesmi, K. (2017). Banking stability in the MENA region during the global financial crisis and the European sovereign debt debacle. The Journal of Risk Finance, 18(4), 381–397. https://doi.org/10.1108/jrf-10-2016-0134
Vu, T. Q., & Afifa, M. A. (2024). Factors affecting the technological innovation of banks toward accounting benefits in a developing country’s industrial revolution 4.0 context: Evidence from Vietnam. Global Knowledge, Memory and Communication. https://doi.org/10.1108/gkmc-01-2024-0016
Yudaruddin, R. (2022). Financial technology and performance in Islamic and conventional banks. Journal of Islamic Accounting and Business Research, 14(1), 100–116. https://doi.org/10.1108/jiabr-03-2022-0070
Yudaruddin, R. (2024). Financial technology and banking market discipline in Indonesia banking. Journal of Asia Business Studies, 18(2), 299–317. https://doi.org/10.1108/jabs-05-2022-0174
Zahra, A. N. A., & Miranti, T. (2023). The Sharia bank stability: How FinTech and financial ratio fixed it? I-Finance: A Research Journal on Islamic Finance, 9(1), 51–69. https://doi.org/10.19109/ifinance.v9i1.17023
Zhang, N., Ahmad, M., & Talib, Z. M. (2024). The Impact of Technological Innovation Policy on the Performance of Chinese listed Seed Companies: The mediator role of R&D investment. Pakistan Journal of Life & Social Sciences, 22(2). https://doi.org/10.57239/PJLSS-2024-22.2.00311
