THE INFLUENCE OF FINANCIAL RISK ON BANK STOCK RETURN IN MALAYSIA
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Universiti Malaysia Sarawak (UNIMAS)
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This study examines how financial risk affects the stock returns of Malaysian banks listed on Bursa Malaysia between 2015 and 2024. Utilizing a multivariate Generalized Least Squares (GLS) regression model, it analyzes the impact of four major financial risks—credit risk, market risk, liquidity risk, and capital risk—both individually and collectively on bank stock performance. The research draws data from quarterly reports and financial databases, providing a solid 10-year quarterly sample that includes 9 listed banks. Diagnostic tests, such as those for heteroscedasticity, multicollinearity, and autocorrelation, affirm the validity of the results. The results indicate that among the examined variables, only the capital-to-asset ratio has a statistically significant positive effect on stock returns, suggesting that stronger capitalization enhances investor confidence and market valuation. Other risk indicators were not significant, reflecting the potential efficiency of the market in incorporating public information. This research offers practical insights for investors, bank executives, and regulators, facilitating enhanced risk mitigation, financial stability, and market resilience within Malaysia's banking sector.