Black Gold’s Price Plunge: Are Conventional and Islamic Banks Equally Vulnerable?

Rubbaniy, Ghulame; El-Temtamy, Osama; Khan, Walayet A.; Perveen, Anjum

doi:10.2139/ssrn.3316998

Cited by 2 publications

(2 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The US financial system has been widely affected by economic downturns in the past, and studies have compared the effect of crises with normal times in the banking sector (see, e.g., Abbas et al, 2021; Berger & Bouwman, 2017; Davydov et al, 2018; Rubbaniy et al, 2019). We also investigate the role of the BC to explain the LC of US bank holding companies during the crisis and normal times.…”

Section: Resultsmentioning

confidence: 99%

Cyclicality of liquidity creation: Nonlinear evidence from US bank holding companies

Rubbaniy,

Khalid,

Ali

et al. 2023

J of Financial Research

Self Cite

View full text Add to dashboard Cite

Using a panel smooth transition regression framework on a new proxy of the business cycle (BC) index and quarterly data of US bank holding companies from 1993Q1 to 2020Q1, our results provide empirical support for the theory that the BC has a nonlinear effect on liquidity creation. We find a positive and highly significant nonlinear effect of the BC on liquidity creation, which not only supports the pro‐cyclicality of liquidity creation but also improves the liquidity creation estimation compared to previous studies. The results are robust to different proxies of the BC and model specifications. We also document that US bank holding companies create liquidity more during the expansion phase (normal times) than during the recession phase (crisis times) of the BC, suggesting an asymmetrical effect of BC changes on liquidity creation. Our findings have important implications for financial market participants by suggesting that banks should keep alternative sources of funding on hand during the BC recession phase. Insights from our study also provide policy implications for central banks and prudent supervisors to consider when incentivizing banks, for instance, by lowering regulatory requirements, adjusting the policy rate, or implementing any other quantitative easing policy during the BC recession phase to keep the financial system efficient.This article is protected by copyright. All rights reserved.

show abstract

Section: Resultsmentioning

confidence: 99%

Cyclicality of liquidity creation: Nonlinear evidence from US bank holding companies

Rubbaniy,

Khalid,

Ali

et al. 2023

J of Financial Research

Self Cite

View full text Add to dashboard Cite

show abstract

“…For example, a rapid increase in nonperforming loans indicates possible bank failure, and banks with higher nonperforming loans are forced to make provisions for potential loan losses (Ayuso et al, 2004; Jokipii & Milne, 2008; Li et al, 2016). Additionally, higher loan loss provisions signal lower quality of bank assets and losses due to nonpayment of loans become a threat to bank's stability (Fillat & Montoriol‐Garriga, 2010; Korbi & Bougatef, 2017; Rubbaniy et al, 2019). We also control for the existence of a global financial crisis using a financial crisis dummy (

{CRISIS}_{t}

), which takes value 1 if crisis and 0 otherwise.…”

Section: Methodsmentioning

confidence: 99%

Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

et al. 2021

Self Cite

View full text Add to dashboard Cite

Our study uses a new business cycle (BC) index and a nonlinear panel smooth transition regression model on quarterly data of 1538 bank holding companies of the United States to investigate response of capital adequacy ratios (CARs) to changes in economic activity. Our findings confirm the existence of nonlinear effects of BC on CARs. Although we use a nonlinear model and a new proxy of BC, our results about CARs are not only consistent with existing mainstream literature but also improve estimation and goodness of the estimation of CARs. The study outcome is useful for policymakers for CARs' standards adjustments during recessions.

show abstract

Black Gold’s Price Plunge: Are Conventional and Islamic Banks Equally Vulnerable?

Cited by 2 publications

References 0 publications

Cyclicality of liquidity creation: Nonlinear evidence from US bank holding companies

Cyclicality of liquidity creation: Nonlinear evidence from US bank holding companies

Cyclicality of capital adequacy ratios in heterogeneous environment: A nonlinear panel smooth transition regression explanation

Contact Info

Product

Resources

About