Firm investment and bank health: evidence from Malaysian listed firms

This paper examines the impact of bank financial health on firm investment. The firm-level data are obtained from firms that were listed on Bursa Malaysia between 2000 and 2007. This paper aims to provide additional empirical evidence based on an original paper by Fukuda, Kasuya and Nakajima (2005). This paper also extends the previous literature by using unbalanced panel data methodology. In order to have a robust result, the GLS estimation method is used, instead of OLS. In measuring the bank health, this study uses the core capital ratios (CCR), risk weighted capital-adequacy ratios (RWCR) and non-performing loans (NPL) figures. The findings indicate that: first, CCR and RWCR have positive impact on investment by firms. The possible explanation is that when CCR and RWCR deteriorate, bank lending is reduce