Factors Affecting Personal Bankruptcy among Malaysians
Keywords:
Personal Bankruptcy, Malaysian, Bankruptcy Cases
Abstract
Malaysia faces higher bankruptcy cases involving personal bankruptcies among Malaysians despite increasing the threshold of a personal bankruptcy declaration. This research aims to study the factors influencing Malaysian personal bankruptcy, utilizing the macroeconomic aggregates as the determinants, which are inflation rate (IR), unemployment rate (UE), lending interest rate (LR), Gross Domestic Product (GDP) per capita and household final consumption expenditure (HFCE). This study uses a quantitative approach and time series analysis which includes a group of data from 1985 to 2021, i.e., 37 years of observations. The sample series of time frames is sufficient to assess the long-term relationship between the macroeconomic perspectives and personal bankruptcy. The data was analyzed using multiple linear regression analysis. The finding shows a significant negative relationship between Malaysian personal bankruptcy and unemployment rate, lending interest rate and household final consumption expenditure. In contrast, there is an insignificant relationship between Malaysian personal bankruptcy and the inflation rate
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References
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Hang, H. T. T., Ha, D. T. & Thanh, B. D. (2020). Factors Affecting Bad Debt in the Vietnam Commercial Banks. Journal of Economics and Business, 3(2), 651–60. doi: 10.31014/aior.1992.03.02.228.
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Haw, C. M., Ying, L. W., Xuan, L. J., Cindy, O. & Qian T. Y. (2019). The Effect of Macroeconomics and Social Element toward Personal Bankruptcy in Malaysia. Doctoral Dissertation, Universiti Tunku Abdul Rahman.
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Kubálek, J., ?ámská, D. & Strouhal, J. (2018). Personal Bankruptcies from Macroeconomic Perspective. International Journal of Entrepreneurial Knowledge, 5(2), 78–88. doi: 10.1515/ijek-2017-0013.
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Legal-Cañisá, D. (2019). Unemployment Insurance with Consumer Bankruptcy. Job Market Paper, 1–56.
Lerner, A. P. (1936). Keynes’ Theory of Employment, Interest and Money. The Economic Journal 46(182), 435–54.
Dahne, L. & Steege, L. (2020, May 27). Destabilizing Effects of Consumer Bankruptcy. (724204), 43.
Lloyd, C. (2021). Unemployment and Bankruptcies – Is This Time Different? American Institute for Economic Research. https://www.aier.org/article/unemployment-and-bankruptcies-is-this-time-different/.
Malaysian Department of Insolvency. (2006). VI.18 Selected Statistics on Cheque Offenders, Cheques Cleared and Bankruptcies.
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Richard Banks & Associates. (2020). Does Bankruptcy Hurt the Economy or Help It? Tennessee Bankruptcy Law. https://www.rbankslawfirm.com/blog/2020/10/does-bankruptcy-hurt-the-economy-or-helpit/.
Rogerson P. A. (2001). A Statistical Method for the Detection of Geographic Clustering. John Wiley & Sons, Inc. 33(3). https://doi.org/10.1111/j.1538-4632.2001.tb00445.x
Schuh, A. B., Filho, P. J. M. & Coronel, D. A. (2019). Determinants of the Default Rate of Individual Clients in Brazil and the Role of Payroll Loans. Economics Bulletin, 39(1), 395–408.
Selvanathan, M., Krisnan, U. D. & Wen, W. C. (2016). Factors Affecting Towards Personal Bankruptcy among Residents: Case Study in Klang Valley, Malaysia. International Journal of Human Resource Studies, 6(3), 98. doi: 10.5296/ijhrs.v6i3.10092.
Smaoui, H., Mimouni, K. & Temimi, A. (2020). The Impact of Sukuk on the Insolvency Risk of Conventional and Islamic Banks. Applied Economics, 52(8), 806–24. doi: 10.1080/00036846.2019.1646406.
Srivastav, A. K. & Vaidya, D. (2023). Rate of Inflation Formula - Calculator, Examples, Uses. WallStreetMojo. https://www.wallstreetmojo.com/rate-ofinflation-formula/.
Nor, S. H. S., Ismail, S. & Yap, B. W. (2019). Personal Bankruptcy Prediction Using Decision Tree Model. Journal of Economics, Finance and Administrative Science, 24(47), 157–70. doi: 10.1108/JEFAS-08-2018-0076/FULL/PDF.
Ann-Yew, T. (2017). Factors of Personal Bankruptcy: A Case Study of Malaysia. (Unpublished Thesis). Universiti Tunku Abdul Rahman.
The World Bank. (2023, August 3). Households and NPISHs Final Consumption Expenditure (% of GDP) Malaysia. The World Bank. https://data.worldbank.org/indicator/NE.CON.PRVT.ZS?locations=MY.
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Yunchao, C., Yusof, S. A., Amin, R. M. & Arshad, M. N. M. (2020). Household Debt and Household Spending Behavior: Evidence from Malaysia. Jurnal Ekonomi Malaysia, 54(1), 111–20. doi: 10.17576/JEM-2020-5401-8.
Zach. (2020). How to Read a Correlation Matrix, Statology. https://www.statology.org/how-to-read-a-correlation-matrix/.
Zainol, J. M., Nor, A. M., Ibrahim, S. N. & Daud, S. (2018). Macroeconomics Determinants of Non-Performing Loans in Malaysia: An ARDL Approach. International Journal of Academic Research in Business and Social Sciences, 8(10), 692–706. doi: 10.6007/ijarbss/v8-i10/4773.
Zainul, E. (2021). Malaysia’s Household Debt-to-GDP Ratio Surges to New Peak of 93.3%, The Edge Markets. https://www.theedgemarkets.com/article/malaysias-household-debttogdp-ratio-surges-newpeak-933.
Ahmad, N. H., Isa, A. M. & Zainol, Z. (2022). Personal Bankruptcy in Malaysia and Singapore: An Empirical Analysis. Journal of Economics and Sustainability, 4(1), 33–47. doi: 10.32890/jes2022.4.1.3.
Akbar, A, Akbar, M., Tang, W. & Qureshi, M. A. (2019). Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan. Sustainability (Switzerland), 11(3), 1–22. doi: 10.3390/su11030678.
Alias, Z., Azmi, R. & Yusof, R. M. (2018). The Effects of Macroeconomics Determinants and Secured Financing of Islamic Banks on Personal Insolvency: An Empirical Investigation on Malaysia. International Journal of Economics, Management and Accounting, 26(2), 475–97.
Amine, S. & Predelus, W. (2009). The Persistence of the 2008-2009 Recession and Insolvency Filings in Canada. Economics Bulletin, AccessEcon, 39(1), 84–93.
Athukorala, P. (2010). Malaysian Economy in Three Crises. Working Papers in Trade and Development, (17), 1–26.
Bank Negara Malaysia. (2022a). Consumer Guide on the Revised Reference Rate Framework, 1–6. https://www.bnm.gov.my/documents/20124/938039/Consumer+Guide_RRF_EN.pdf
Bank Negara Malaysia. (2022b). Surat Kepada Pengarang: Trend Kes Muflis Menurun; Tindakan Kebankrapan Adalah Jalan Terakhir Bagi Institusi Kewangan - Bank Negara Malaysia. https://www.bnm.gov.my/-/surat-kpd-pengarang20220714.
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Bank Negara Malaysia. (2019). Economic & Monetary Review 2019: Executive Summary. https://www.bnm.gov.my/o/annual-report/emr-summary.html.
Barth, J. R., Caprio Jr., G., James R. & Levine, R. (2013). Bank Regulation and Supervision in 180 Countries from 1999 to 2011. Journal of Financial Economic Policy, 5(2), 1– 110. doi: 10.3386/W18733.
Boukhatem, J. & Moussa, F. B. (2018). The Effect of Islamic Banks on GDP Growth: Some Evidence from Selected MENA Countries. Borsa Istanbul Review, 18(3), 231–47. doi: 10.1016/j.bir.2017.11.004.
Bryga?a, M. (2022). Consumer Bankruptcy Prediction Using Balanced and Imbalanced Data. Risks, 10(2), 24. doi: 10.3390/risks10020024.
Dahlan, A. R. (2017, April 22). Please Learn Some Economics, Guan Eng. Malaysiakini. https://www.malaysiakini.com/news/380010.
Department of Statistics Malaysia. (2023). Department of Statistics Malaysia Official Portal. https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=490&bul_id=ZWE0MEZ4MzNZS2xlcm4zdGNWbEJtZz09&menu_id=bThzTHQxN1ZqMVF6a2I4RkZoND FkQT09.
Devi, A. & Firmansyah, I. (2018). Solution to Overcome the Bankruptcy Potential of Islamic Rural Bank in Indonesia. Journal of Islamic Monetary Economics and Finance, 3, 33–58. doi: 10.21098/jimf.v3i0.750.
Editor. (2021). Low EPF Savings If Not Addressed Could Lead To Mass Bankruptcy. Business Today. https://www.businesstoday.com.my/2021/11/27/low-epf-savings-if-not-addressed-couldlead-to-mass-bankruptcy/.
Elvery, J. A. & Schweitzer, M. E. (2020). Partially Disaggregated Household-Level Debt Service Ratios: Construction, Validation, and Relationship to Bankruptcy Rates. Contemporary Economic Policy, 38(1), 166–87. doi: 10.1111/coep.12434.
Fernando, J. (2022). Inflation: What It Is, How It Can Be Controlled, and Extreme Examples. Investopedia. https://www.investopedia.com/terms/i/inflation.asp.
Furhmann, R. (2022). How Banks Set Interest Rates on Your Loans. Investopedia. https://www.investopedia.com/articles/investing/080713/how-banks-set-interest-ratesyour-loans.asp.
Gallagher, E. A., Gopalan, R., Grinstein-Weiss, M. & Sabat, J. (2020). Medicaid and Household Savings Behavior: New Evidence from Tax Refunds. Journal of Financial Economics, 136(2), 523–46. doi: 10.1016/j.jfineco.2019.10.008.
Hang, H. T. T., Ha, D. T. & Thanh, B. D. (2020). Factors Affecting Bad Debt in the Vietnam Commercial Banks. Journal of Economics and Business, 3(2), 651–60. doi: 10.31014/aior.1992.03.02.228.
Hassan, S., Jati, M. K. K., Yatim, N. H. M. & Majid, M. A. A. (2021). Factors Influencing Personal Bankruptcy Among Youth in Malaysia. Advanced International Journal of Banking, Accounting and Finance, 3(7), 85–91. doi: 10.35631/aijbaf.37007.
Haw, C. M., Ying, L. W., Xuan, L. J., Cindy, O. & Qian T. Y. (2019). The Effect of Macroeconomics and Social Element toward Personal Bankruptcy in Malaysia. Doctoral Dissertation, Universiti Tunku Abdul Rahman.
IndexMundi. (2019). Households and NPISHs Final Consumption Expenditure (% of GDP) by Country. IndexMundi. https://www.indexmundi.com/facts/indicators/NE.CON.PRVT.ZS.
Isa, A. M., Ahmad, N. H. & Zainol, Z. (2021). DETERMINANTS OF PERSONAL BANKRUPTCY DISCHARGE IN MALAYSIA: A SOCIAL CAPITAL APPROACH OF AL-NAHD AND TA’AWUN International Journal of Islamic Business, 6(2), 25–36. doi: 10.32890/IJIB2021.6.2.3.
Khan, I, Ahmad, A., Khan, M. T. & Ilyas, M. (2018). The Impact of GDP, Inflation, Exchange Rate, Unemployment and Tax Rate on the Non-Performing Loans of Banks: Evidence from Pakistani Commercial Banks. Journal of Social Sciences and Humanities, 26(1), 141–64.
Korol, T. (2022). Challenge and Research Trends of Forecasting Financial Energy. Energies. https://doi.org/10.3390/books978-3-0365-3668-2.
Kubálek, J., ?ámská, D. & Strouhal, J. (2018). Personal Bankruptcies from Macroeconomic Perspective. International Journal of Entrepreneurial Knowledge, 5(2), 78–88. doi: 10.1515/ijek-2017-0013.
Lee, Esther. (2020). Cover Story: Lessons from the Last Three Major Economic Crises, The Edge Markets. https://www.theedgemarkets.com/article/cover-story-lessons-last-three-major-economiccrises.
Lee, H. A. & Zhang, K. (2021). The Covid-19 Recession: Rough Times for Young Malaysians Malaysia Now. https://www.malaysianow.com/opinion/2021/09/09/the-covid-19-recession-rough-timesfor-young-malaysians.
Legal-Cañisá, D. (2019). Unemployment Insurance with Consumer Bankruptcy. Job Market Paper, 1–56.
Lerner, A. P. (1936). Keynes’ Theory of Employment, Interest and Money. The Economic Journal 46(182), 435–54.
Dahne, L. & Steege, L. (2020, May 27). Destabilizing Effects of Consumer Bankruptcy. (724204), 43.
Lloyd, C. (2021). Unemployment and Bankruptcies – Is This Time Different? American Institute for Economic Research. https://www.aier.org/article/unemployment-and-bankruptcies-is-this-time-different/.
Malaysian Department of Insolvency. (2006). VI.18 Selected Statistics on Cheque Offenders, Cheques Cleared and Bankruptcies.
Malaysian Department of Insolvency. (2007). 5.18 Statistik Terpilih Atas Cek Rosak, Cek Jelas Dan Bankrupt. https://www.bnm.gov.my/documents/20124/482708/5.18.pdf.
Malaysian Department of Insolvency. (2022). Personal Bankruptcy. https://www.mdi.gov.my/index.php/home/about-us/core-business/corebusiness/personal-bankruptcy?highlight=WyJiYW5rcnVwdGN5Il0=.
Malaysian Department of Insolvency. (2022a). 1. What Is Bankruptcy? https://www.mdi.gov.my/index.php/home/faqs/103-bankruptcy-faq/1640-1-what-isbankruptcy.
Malaysian Department of Insolvency. (2022b). Bankruptcy. https://www.mdi.gov.my/index.php/home/faqs/bankruptcy.
Mien, T. S. & Said, R. (2018). A Cross-Sectional Household Analysis of Household Consumption Patterns: An Indirect Approach to Identify the Possible Factors of Personal Bankruptcy. Jurnal Ekonomi Malaysia, 52(3), 245–61. doi: 10.17576/JEM-20185203-18.
Khan, M. A. & Layali, N. (2020). The Evolution of Unemployment in Malaysia. 1–5.
Yusoff, Z. Z. M., Bahrudin, N. Z., Ismail, I., Bujang, I., Che Yahya, N. & Sundram, V. P. K. (2022). Quantitative Research Methods. (3rd ed). MLSCA ASIAN ACADEMY.
Othman, Z. A., Bakar, A. A., Sani, N. S. & Sallim, J. (2020). Household Overspending Model amongst B40, M40 and T20 Using Classification Algorithm. International Journal of Advanced Computer Science and Applications, 11(7), 392–99. doi: 10.14569/IJACSA.2020.0110751.
Oxford University Press. (2009). Cycle of Poverty. A Dictionary of Geography (4th ed.)- Oxford University Press.
Pettinger, T. (2022). Does a Lower Budget Deficit Lead to Lower Interest Rates? Economics Help. https://www.economicshelp.org/blog/148235/debt/does-a-lower-budget-deficit-lead-tolower-interest-rates/).
Ninh, P. V., Thanh, T. D. & Hong, D. V. (2018). Financial Distress and Bankruptcy Prediction: An Appropriate Model for Listed Firms in Vietnam. Economic Systems, 42(4), 616–24. doi 10.1016/j.ecosys.2018.05.002.
Richard Banks & Associates. (2020). Does Bankruptcy Hurt the Economy or Help It? Tennessee Bankruptcy Law. https://www.rbankslawfirm.com/blog/2020/10/does-bankruptcy-hurt-the-economy-or-helpit/.
Rogerson P. A. (2001). A Statistical Method for the Detection of Geographic Clustering. John Wiley & Sons, Inc. 33(3). https://doi.org/10.1111/j.1538-4632.2001.tb00445.x
Schuh, A. B., Filho, P. J. M. & Coronel, D. A. (2019). Determinants of the Default Rate of Individual Clients in Brazil and the Role of Payroll Loans. Economics Bulletin, 39(1), 395–408.
Selvanathan, M., Krisnan, U. D. & Wen, W. C. (2016). Factors Affecting Towards Personal Bankruptcy among Residents: Case Study in Klang Valley, Malaysia. International Journal of Human Resource Studies, 6(3), 98. doi: 10.5296/ijhrs.v6i3.10092.
Smaoui, H., Mimouni, K. & Temimi, A. (2020). The Impact of Sukuk on the Insolvency Risk of Conventional and Islamic Banks. Applied Economics, 52(8), 806–24. doi: 10.1080/00036846.2019.1646406.
Srivastav, A. K. & Vaidya, D. (2023). Rate of Inflation Formula - Calculator, Examples, Uses. WallStreetMojo. https://www.wallstreetmojo.com/rate-ofinflation-formula/.
Nor, S. H. S., Ismail, S. & Yap, B. W. (2019). Personal Bankruptcy Prediction Using Decision Tree Model. Journal of Economics, Finance and Administrative Science, 24(47), 157–70. doi: 10.1108/JEFAS-08-2018-0076/FULL/PDF.
Ann-Yew, T. (2017). Factors of Personal Bankruptcy: A Case Study of Malaysia. (Unpublished Thesis). Universiti Tunku Abdul Rahman.
The World Bank. (2023, August 3). Households and NPISHs Final Consumption Expenditure (% of GDP) Malaysia. The World Bank. https://data.worldbank.org/indicator/NE.CON.PRVT.ZS?locations=MY.
The Star. (2022). 18 People Declared Bankrupt Daily. Nation. https://www.thestar.com.my/news/nation/2022/06/23/18-people-declaredbankrupt-on-a-daily-basis.
White, M. J. (2006). Bankruptcy and Consumer Behavior: Theory and Evidence From the US. The Economics of Consumer Credit, 1–39. doi: 10.7551/mitpress/2607/001/0001.
Yunchao, C., Yusof, S. A., Amin, R. M. & Arshad, M. N. M. (2020). Household Debt and Household Spending Behavior: Evidence from Malaysia. Jurnal Ekonomi Malaysia, 54(1), 111–20. doi: 10.17576/JEM-2020-5401-8.
Zach. (2020). How to Read a Correlation Matrix, Statology. https://www.statology.org/how-to-read-a-correlation-matrix/.
Zainol, J. M., Nor, A. M., Ibrahim, S. N. & Daud, S. (2018). Macroeconomics Determinants of Non-Performing Loans in Malaysia: An ARDL Approach. International Journal of Academic Research in Business and Social Sciences, 8(10), 692–706. doi: 10.6007/ijarbss/v8-i10/4773.
Zainul, E. (2021). Malaysia’s Household Debt-to-GDP Ratio Surges to New Peak of 93.3%, The Edge Markets. https://www.theedgemarkets.com/article/malaysias-household-debttogdp-ratio-surges-newpeak-933.
Published
2023-09-17
How to Cite
Che-Yahya, N., Mohd Kassim, N. A., Alyasa-Gan, S. S., & Nori, B. N. (2023). Factors Affecting Personal Bankruptcy among Malaysians. Information Management and Business Review, 15(3(SI), 229-243. https://doi.org/10.22610/imbr.v15i3(SI).3479
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Copyright (c) 2023 Norliza Che-Yahya, Nor Akila Mohd Kassim, Siti Sarah Alyasa-Gan, Beche Nediam Nori
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