Determinants of Profitability – A Comparative Analysis of Islamic Banks and Conventional Banks in ASEAN Countries

Wahidudin, Ahmad Nazri; Subramaniam, Ulaganathan; Kamaluddin, Pengiran. Abd Mutalib Pg.

doi:10.2139/ssrn.2251602

Cited by 6 publications

(6 citation statements)

References 10 publications

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“…Since our study period falls within the period of the global financial crisis, we predict the growth variable, GDP, to be a negative determinant of bank performance (Subramanian et al, 2013). With regard to the inflation variable (INF), in conventional banking, high inflation rates should lead to higher loan rates, which in turn would result in higher revenues (Elnahass et al 2018).…”

Section: Empirical Modelmentioning

confidence: 99%

“…With regard to the inflation variable (INF), in conventional banking, high inflation rates should lead to higher loan rates, which in turn would result in higher revenues (Elnahass et al 2018). For Islamic banks, INF is likely to be positively associated with performance only if a large portion of the profits accrue from debt-based contracts (i.e., Murabaha-cost plus markup) (Subramanian et al, 2013). In our study, with the assumption that Islamic banking is at present mostly based on debt rather than equity-based contracts, we expect inflation to have a positive effect on religious adherent banks' performance.…”

Section: Empirical Modelmentioning

confidence: 99%

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New insights into bank asset securitization: The impact of religiosity

Abdelsalam

Elnahass

Batten

et al. 2021

Journal of Financial Stability

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Section: Empirical Modelmentioning

confidence: 99%

Section: Empirical Modelmentioning

confidence: 99%

New insights into bank asset securitization: The impact of religiosity

Abdelsalam

Elnahass

Batten

et al. 2021

Journal of Financial Stability

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“…Regarding the inflation variable, in conventional banking high inflation rates should lead to higher loan rates, which in turn would lead to higher revenues (Bashir, 2000;Haron, 2004). For RA banks, inflation is likely to be positively associated with performance only if a large portion of profits accrue from debtbased contracts (i.e., Murabaha) (Subramanian et al, 2013). In our study, with the assumption that religiously adhered banking is currently mostly based on debt rather than equity-based contracts, we expect inflation to have a positive effect on RA banks' performance.…”

Section: Empirical Modelmentioning

confidence: 78%

“…This situation is expected to increase bank cash flow, interest earnings, and profits. Since our study period falls within the crisis, we predict the growth variable, GDP, to be a negative determinant of bank performance (Subramanian et al, 2013). Regarding the inflation variable, in conventional banking high inflation rates should lead to higher loan rates, which in turn would lead to higher revenues (Bashir, 2000;Haron, 2004).…”

Section: Empirical Modelmentioning

confidence: 99%

Religiosity and Bank Asset Securitization

2017

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The global financial turmoil of 2007-2008 underlines the importance of understanding asset securitization, a process that allows banks to shed credit risk, fund their credit growth, and arbitrage capital requirements. Examining this ethically questionable activity has become crucial given its perceived long-term social impact. This paper examines the factors that motivate banks' decisions to enter into asset securitization. In particular, we examine the influence of both organizational and geographic religiosity as important ethical parameters of economic choices on banks' decisions to securitize their assets. We employ propensity scores using a unique database on asset securitization of banks in 22 countries during the period of 2003-2012. We find that both types of religiosity indicators are significantly associated with banks' decisions to securitize. Banks located in countries with high religious importance scores show a lower likelihood to securitize. We also find that religiously adhered banks are likely to embark on a constrained model of securitization, which involves a high level of monitoring. In addition, our analysis suggests that religiously adhered banks are less likely to engage in asset securitization to reduce credit risk by shifting it to new investors. This conclusion is supported by their lower credit risk in the years before securitization. Alternatively, our results suggest that these banks embark on asset securitization to improve their financial and regulatory performance. Our study emphasizes the importance of considering religiosity as an important institutional factor and a monitoring mechanism in future global banking studies. Findings in this study are of importance to researchers, to local and international regulators, and to different stakeholders in the international banking sector.

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“…This is expected to increase bank cash flow, interest earnings and profits. As our study period falls within the crisis, we predict the growth variable, GDP to be a negative determinant of bank performance (Subramanian et al, 2013). Regarding the inflation variable, in conventional banking high inflation rates should lead to higher loan rates which in turn would lead to higher revenues (Bashir, 2000;Haron, 2004).…”

Section: Measures Of Explanatory Variablesmentioning

confidence: 98%