Sector-Specific, Monetary Policy, and Macroeconomic Determinants of Business Dynamics: Evidence from Financial Services Industry in Malaysia

Abstract

This paper examines the effects of sector-specific factors, macroeconomic factors, and monetary policy factors on business dynamic of Malaysian financial services industry. The study employed the whole public-listed financial services industry in Malaysia consisting of 10 public-listed banks, 9 insurance institutions, and 14 other financial institutions. In considering the crisis factor, four models have been developed for each sector: a) First and second models make distinctive comparison on the effect of financial crisis dummy variable during 2008-09, b) Third and fourth models investigate the dataset separately from the year 2000 to 2007, and from the year 2010 to 2019 respectively, particularly, pre-crisis period, and post-crisis period. This study found that there exists significant relationship among sector-specific factors, economic factors, and monetary policy factors, as well as business dynamics across banks, insurance, and other financial institutions industry. Nevertheless, by factoring in crisis factors, the impact seems to be mere significant across three industries which indicate that income activities will lead to bank and non-bank activities which is less fluctuated to systemic crisis.