A Threshold Regression Study on the Impact of Capital Adequacy Ratio on the Profitability of ASEAN-5 Banks

Lim Ming Jin ¹ , Tan KokKiang ²* , Hazlina Binti Darman ² , Amirreza Saba ³

1 Asia Pacific University of Technology and Innovatio, Kuala Lumpur, Malaysia, Email: mingjin.lim@gmail.com

2 Asia Pacific University of Technology and Innovation, Kuala Lumpur, Malaysia

3 Marymount university, Virginia, USA

*Corresponding e-mail: tkokkiang@yahoo.com and kok.kiang@staffemail.apu.edu.my

Abstract

The main objective of this research is to find out the threshold effect Asean-5 banks’ capital adequacy ratio (CAR) to its profitability which is measured by return on assets (ROA) and return on equity (ROE) by the threshold regression model. In order to obtain result with higher accuracy, a controlled variable, bank size which is determined by the banks total assets, is added into the model.

Keywords: Capital Adequacy Ratio (CAR), Threshold Regression, Return on Assets (ROA), Re- turn on Equity (ROE), Profitability

DOI: https://doi.org/10.59857/ijabs.1406