Unlocking Financial Stability: Exploring Internal Factors in Malaysian Commercial Banks

In an era of global financial uncertainty, this study examines the internal determinants of financial stability within Malaysian commercial banks, leveraging a dataset comprising 160 bank-year observations sourced from Eikon Thompson Reuters. Employing rigorous multiple regression analysis, our investigation reveals the pivotal roles of capital adequacy, profitability, and bank size in shaping financial stability. Capital adequacy, measured through the Capital Adequacy Ratio (CAR), emerges as a cornerstone driver, emphasizing the critical importance of well-capitalized banks in withstanding economic shocks. Profitability, reflected in the Return on Asset (ROA), plays a significant role, showcasing the link between profitability and stability within the banking sector. Larger banks also exhibit heightened stability, likely attributed to economies of scale and effective risk diversification. The findings provide valuable insights that can guide policymakers and banking institutions in strengthening Malaysia's banking sector's resilience. This, in turn, contributes to maintaining economic stability amidst the ongoing global financial uncertainties.