Purpose – The purpose of this paper is to examine the association between directors’ remuneration and performance and corporate governance in the Malaysian banking sector, using panel data for 21 banks over the period 2003-2011. Design/methodology/approach – The authors use multivariate regression analysis to examine the relationship between directors’ remuneration and performance and corporate governance. The authors also run Granger causality test to determine the existence of causality between directors’ remuneration and performance. Findings – The authors find clear evidence of a positive association between directors’ remuneration and performance. Further, the causality test reveals that directors’ remuneration tends to Granger-cause performance. In terms of governance variables, the authors find that directors’ remuneration is positively related to the percentage of independent directors, and negatively related to board size, but unrelated to duality and percentage of director share ownership. The authors also find that remuneration is positively related to bank size and negatively related to capital ratio. The evidence also shows that foreign banks perform better than domestic banks despite the relatively lower pay received by their directors. Practical implications – The findings imply that high-quality directors, as implied by their remuneration packages, are a significant determinant of performance. Originality/value – The results of this study provide new evidence concerning the relationship between directors’ remuneration and performance in the banking sector in Malaysia.

Purpose The purpose of this paper is to examine the dimensions of service quality (SERVQUAL) from the perspective of the customers and its relationships with perceived overall SERVQUAL in retail banking and also investigate the relationships between perceived overall SERVQUAL and customer trust, customer satisfaction, and bank reputation. Design/methodology/approach A survey questionnaire was constructed, and data were collected from 375 regular customers of local banks. The convenience sampling method was employed to collect data from existing customers of local banks operating in the Klang Valley area of Malaysia. Structural equation modelling was applied to analyse the data. Findings The results of the study indicate four key dimensions of SERVQUAL – tangibles, empathy, reliability and security, and internet banking – all of which are significantly and positively related to customers’ perceived overall SERVQUAL. Internet banking facilities are another significant determinant of the perceived overall SERVQUAL. The results are indicative of the strong and positive effect upon customer satisfaction, their trust in the bank, and, finally, a bank’s reputation. Research limitations/implications This study has presented and tested empirical study of perceived overall SERVQUAL model in the banking industry, particularly in the Malaysian context. This research identified the dimensions of SERVQUAL (i.e. tangibles, empathy, reliability and security, and internet banking) that influence the overall perceived SERVQUAL, and how these overall perceptions will eventually influence customer trust, customer satisfaction, and bank reputation is valid and reliable in retail banking industry. This study, however, only focussed on the banking industry. Given the diversity of the service industry, these findings may have to be tested for the applicability to different service industries in future studies. Practical implications This research is useful to bank managers as it helps them improve SERVQUAL to protect and expand their respective market share in a highly competitive industry. Banks could utilise the results of this study to improve their service tangibility, empathy, reliability, and security, which will affect both customer trust and satisfaction, and enhance a bank’s reputation. Social implications The findings of specific dimensions of SERVQUAL will contribute to customer perception of banks’ image and reputation, and strengthen trust and satisfaction. Moreover, assisting customers towards the understanding of how they should received high quality of services with regard to quality should be perceived as emphatic, reliable, secured and tangibility of service. Originality/value The findings of this study highlight the specific dimensionalities of SERVQUAL in influencing the perceived overall SERVQUAL. This study will increase the understanding on the impact of perceived overall SERVQUAL on consumer trust, customer satisfaction, and a bank’s reputation. Specifically, it reports an empirical study of a model of perceived overall SERVQUAL that simultaneously considers the direct effects of perceived overall SERVQUAL on customer trust, customer satisfaction and bank reputation.

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Purpose The purpose of this paper is to determine of bank margins for conventional and Islamic banks in the dual banking system in Malaysia. Design/methodology/approach The study uses unbalanced panel data for 20 conventional banks and 16 Islamic banks over the period 2008-2014. The dynamic two-step GMM estimator technique introduced by Arellano and Bond (1991) is applied. Findings The results suggest that there are significant similarities with minor differences in terms of factors determining bank margins between conventional and Islamic banks in Malaysia. The margins for conventional banks are influenced by operating costs, efficiency, credit risk, degree of risk aversion, market share, size of operation, implicit interest payments and funding costs. For Islamic banks, the margin determinants are found to be operating costs, efficiency, credit risk, market share and implicit interest payments. This means that more factors influence the margins in conventional banks compared to Islamic banks. Although bank diversification activities have increased in recent years, their impact on bank margins is minimal. Practical implications The results suggest that improving operational costs, operational efficiency and credit risk management, and minimising implicit interest payments would be the best strategy to enhance the bank margins for both conventional and Islamic banks. The results also have important policy implications on the necessity to expand the size of Islamic banking in Malaysia. Originality/value There are relatively few studies concerning determinants of bank margins in emerging markets. The present study adds to the literature by presenting evidence from Malaysia, an emerging market with a dual banking system. This allows us to explore the similarities and differences between conventional and Islamic banks in Malaysia in respect of determinants of the margins.

Purpose Foreign and local banks in Malaysia are competing in terms of skilled staff, innovative products and services, rendering quality services and customer satisfaction. The purpose of this paper is to examine the overall service quality and customer satisfaction of both foreign and local banks. Design/methodology/approach The data used to test the hypothesis were collected from 748 foreign and local bank customers in Malaysia. The research model was analysed using a structural equation modelling technique. Findings Results show that knowledge and staff competencies, as well as convenience of the bank is more significant for local bank customers while bank image and internet banking are important components for foreign bank customers. The results also reveal that foreign bank customers have higher satisfaction as compared to local bank customers. Research limitations/implications No analysis is undertaken of any difference in the service quality dimensions between banks of different size. Further research on banking services could usefully test services quality dimensions across banks of different sizes. Practical implications The findings serve as a valuable reference for local banks understand service quality challenges they may face from foreign banks in this competitive industry. Findings suggest that, to provide high-quality services, financial institutions need to heighten customer satisfaction differentiation strategies. Originality/value The outcomes of this study enhance the knowledge on the performance of both local and foreign banks in Malaysia as well as customer satisfaction, which are invaluable to all bank managers and industry players in improving their services.