Examining the relationship between foreign Islamic Bank entry, asset quality and liquidity with performance of domestic Islamic Banks in Malaysia

This study examines the relationship between foreign bank entry, asset quality and liquidity with performance of domestic Islamic banks in Malaysia. The empirical analysis of the study is restricted to Islamic banks in Malaysia within the period of 2008-2013. The main objective was to determine the effects of foreign Islamic bank entry on domestic Islamic banks in Malaysia. The study used financial ratios of banks by extracting components of CAMELS Model, namely; Asset quality, and Liquidity. The result shows that foreign Islamic bank entry has negative effects on the domestic Islamic banks performance using ROE as a measure but has no effect when ROA was used as a measure of performance. This means that foreign Islamic banks reduce domestic Islamic banks performance. In addition, asset quality and liquidity quality had no significant effect on domestic Islamic banks performance