This study compares the impact of Cash Flow from Investing Activities (CFI) on the Capital Adequacy Ratio (CAR) between Indonesian and Malaysian commercial banks. The study uses time-series data from the countries' big-five banks from 2009 to 2013. This study engages the regression model to measure the CFI's impact on CAR and then applies a Chow test to compare the discrete regression output between the two countries. The statistical tests reveal that the CFI of Indonesian banks correlated negatively with the CAR, while Malaysian banks showed a positive correlation. Consistent with the correlations, the influence of CFI on CAR in both countries is equally significant. By a Chow test, this study concluded that the CFI's impact on CAR significantly differs between the banks in the countries. From the literature perspective, the CFI and CAR relationship of Malaysian banks is closer to the findings of previous detached studies. The figures indicate that nowadays, Malaysian banking harvests cash inflow from their past investments. Otherwise, the Indonesian banks portray the ongoing spending for long-term investment during the recent five years. This preference results in a consistent decrease in CFI when the CAR moves upward. Departing from the existing differences, to optimize the CFI and CAR relationship, this study suggests the CFI and CAR equilibrium formulation for banks to avoid cash shortages and failure to earn interest due to capital buffer retaining to maintain a high ratio of capital adequacy.

This study compares the influence of Cash Flow from Financing Activities (CFF) moderation on the relationship between Cash Flow from Investing Activities (CFI) and Capital Adequacy Ratio (CAR) of the big-five commercial banks in Indonesia and Malaysia. The big-five selections consider the banks' leadership in the countries during the first five years post-crisis 2008. The study uses E-view software to analyze the 2009 to 2013 data, including the stages of the data validity test, simple regression, and multiple regression. Two discrete hierarchical Sobel tests were applied to measure the CFF moderation impact on the CFI and CAR relationship applicable to each group of banks. Finally, the study distinguished the discrete Sobel test outputs using a Chow statistic. The Sobel test shows that in both Indonesian and Malaysian banks, the CFF moderation has positive but insignificant effects on the CFI and CAR relationship. Consistent with the conclusions, the Chow statistic shows a significant difference in the CFF moderation effect on the CFI and CAR relationship. These conclusions bring implications to the interest parties to align their concerns with the two countries' contradictive CFI and CFF funding patterns in shaping the CAR.

This study examines the difference in the simultaneous impact of Cash Flow from Operating Activities (CFO), Cash Flow from Investing Activities (CFI), and Cash Flow from Financing Activities (CFF) on Capital Adequacy Ratio (CAR) between Indonesian and Malaysian commercial banks. By considering the comparability of capital performance post-financial crisis of 2007 to 2008, this study adopted the purposive secondary data published by the big five banks from 2009 to 2013. An E-view statistical software was applied to the panel data to provide coefficients of discrete multivariate regressions between countries and a hypothesis test. The results showed that all Indonesian banks’ CF items negatively correlated with the CAR. Similar correlations also occur for both CFO and CFF on CAR of Malaysian commercial banks, but on the other hand, a positive correlation occurs in the CFI and CAR relationship for Malaysian Commercial banks. Based on a Chow test on the regression outputs, this study concludes that the CFI is the distinguishing factor in the CF’s impact on CAR in the comparison scenario. The finding confirms that Malaysian commercial banks enjoy the Cash Flow stemming from the gains of past investing activities to increase the CAR under study. On the Indonesian side, the negative correlations of CFI, along with CFO and CFF against the CAR alert that refers to the basic CAR formula, the increases in CAR occur concurrently with the annual CFI decreases to spend on investing activities by long term financing. Even though the newest investment contributes to low gains that are inadequate to raise the banks’ equity capital over the increase of risk-weighted assets sooner in the short run.