The determinants of financial development in Malaysia : A panel data analysis

This study aims to investigate the factors that influence the financial development in Malaysia. A panel data was used in this study with 10 companies' annual data listed in Bursa Malaysia from 2006 to 2015. The dependent variables of this study is financial development while the independent variables are non-performing loans, financial structure, inflation rate, saving rate, foreign direct investment, and liquidity illusion. Analysis of panel data method include unit root test, correlation analysis, and panel regression model (Random Effects Model) are employed in this study. The results of the analysis indicated that non-performing loans and saving rate have a significant negative relationship with the financial development while financial structure and foreign direct investment provided an insignificant positive relationship with financial development. Other than that, inflation rate and liquidity illusion showed an insignificant negative relationship with financial development. Financial structure of firm is the most influential variable that affect financial development. The findings of this study are consistent with previous study on financial development. In a nutshell, a further study can be done in order to improve the study