Gauging Profitability and Liquidity of Islamic Banks: Evidence from Malaysia and Pakistan

Khan, Muhammad Asif; Ali, Majid; Khan, Muhammad Atif

doi:10.5296/ijafr.v5i1.6865

Cited by 7 publications

(5 citation statements)

References 20 publications

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“…Islamic banks have higher growth in equity, deposits, investment and total assets, better assets quality and capital adequacy, better credit performance, less risk due to excess liquidity and greater investment in government securities (Abdul-Majid et al, 2011, cited in Milhem andIstaiteyeh 2015, p.29). Khan et al, (2015). aimed in their study at "evaluating and comparatively analyzing the financial performance of all full-fledged Islamic banks operating in Pakistan and five Islamic banks from Malaysia conveniently chosen, subject to profitability and liquidity (Khan et al, 2015, p. 75).…”

Section: Literature Reviewmentioning

confidence: 99%

Does Liquidity Influence Profitability in Islamic Banks of Bahrain: An Empirical Study?

Khasharmeh¹

2018

IJFR

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This study examines the impact of liquidity on Islamic banks" profitability during the years from 2010 to 2015. The study extracted its data from the annual reports of six Islamic banks in Bahrain that have been in operations on or before 2010 to 2015. The liquidity model is built from four liquidity variables namely cash & due from banks to total assets (CDTA), cash & due from banks to total deposits (CDTD), investment to total assets (INVSTA) and investment to total deposits (INVSTD). According to adjusted R squares profitability variables return on assets (ROA), return on equity (ROE) and return on deposits (ROD) are respectively 16.2%, 3.1% and 21.3% dependent on liquidity variables.The results of the study show that CDTD and INVSTD are correlated positively with ROE. In addition, CDTD, INVSTA indicate a negative correlation with ROE. Thus, only INVSTA and INVSTD found to be significant with ROE at 0.05 significant level. Durbin-Watson test shows that the residuals are uncorrelated since its value is approximately very close to 2. However, according to the P-value, the overall liquidity model (Model 2) is not significantly related with ROE. Thus, the null hypothesis (H0) is accepted and the alternative hypothesis is rejected for the ROE. Furthermore, the results in the table show that CDTA and INVSTD are positively correlated with ROD, and negatively with CDTA and INVSTA, and CDTA is the only insignificant variable. CDTD is significantly related with ROD at 10%. Durbin-Watson test shows that the residuals are positive auto -correlated since its value is approximately very close to 1. However, according to the P-value, the overall liquidity model (Model 3), is significantly related with ROD at 1% level.The researcher recommended for further studies to add more liquidity variables to the model so as to enhance and enrich Islamic banks outlook.

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Section: Literature Reviewmentioning

confidence: 99%

Does Liquidity Influence Profitability in Islamic Banks of Bahrain: An Empirical Study?

Khasharmeh¹

2018

IJFR

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“…However, existing literature presents conflicting findings on the impact of board size on bank performance. Some studies [34][35][36] report a positive relation between board size and bank performance. In contrast, other studies [37] indicate an adverse link between these variables.…”

Section: Board Size and Bank Performancementioning

confidence: 99%

Navigating board dynamics: Configuration analysis of corporate governance’s factors and their impact on bank performance

Tahir,

Ghafoor,

Zulfiqar

et al. 2024

PLoS ONE

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This research utilizes the fsQCA technique to investigate how a combination of corporate governance conditions or factors collectively influences the performance of banks. Examining key elements such as board size, busy directors, independent directors, CEO duality, and women on the board, the research employs data collected from the annual reports of 30 banks spanning from 2010 to 2020. The necessary condition analysis (NCA) underscores that no individual condition or factor is indispensable for the ultimate outcome. Nevertheless, the sufficiency analysis reveals distinct solutions, each representing a unique set of conditions or factors sufficient to generate the outcome. The study concludes that the relationship between corporate governance characteristics and bank performance is complex and multifaceted, with neither ROA nor ROE reliant on a singular input condition or factor. The theoretical contributions of the findings align with or partially support various theories and propositions within the realm of corporate governance. Notably, the application of fsQCA contributes to enhance the methodological understanding of corporate governance studies in existing literature.

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“…From the resource dependence theory perspective, scholars underline the prominent role of directors' age, gender and ethnicity. Demographic diversity brings new insight with the help of their diverse professional skills and different cultural background (Khan et al, 2023b;Miller and Del Carmen Triana, 2009;Talavera et al, 2018;Tanikawa and Jung, 2016). In addition, a board with female representation engenders constructive support for the organization's critical financial decisions and resource utilization (Jouber, 2022).…”

Section: Demographic Board Diversity and Financial Distressmentioning

confidence: 99%

Does board diversity reduce the likelihood of financial distress in the presence of a powerful Chinese CEO?

Ali

Rehman

Aslam

et al. 2023

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PurposeThis paper empirically investigates the impact of board diversity in terms of demographic and cognitive dimensions on financial distress likelihood in an emerging Chinese market to explore whether the Chief Executive Officers' (CEOs) power moderates the relationship between board diversity and the probability of financial distress.Design/methodology/approachTo test the hypothesized relationships, demographic diversity through gender, age and nationality, and cognitive diversity through education, expertise and tenure, are taken as independent variables to investigate their impact on the probability of financial distress measured by the Altman China Z score. Data is collected for 13,740 firm-year observations from 2009 to 2018. This study employs panel data regression under fixed effect assumptions. Further, to control the possible endogeneity issue, this study uses a two-step System Generalized Methods of Moments (GMM) model as a robust check.FindingsThe results reveal that board diversity is positively associated with financial distress Z score, suggesting that diverse boards are helpful in reducing the likelihood of financial distress. Moreover, CEO power positively moderates this relationship. It means that board diversity, in the presence of powerful CEOs, is more effective in reducing financial distress likelihood by controlling the wrong financial decisions taken by top executives to reap personal benefits. Further, the robustness model confirms the relationship between board diversity and the probability of financial distress.Originality/valueTo the best of researchers' knowledge, this is one of the earliest studies to investigate board diversity by constructing demographic and cognitive board diversity indexes as a determinant of financial distress likelihood in China. Further, researchers found no study in the literature using CEO power as a contextual variable on the relationship between board diversity and financial distress.

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Gauging Profitability and Liquidity of Islamic Banks: Evidence from Malaysia and Pakistan

Cited by 7 publications

References 20 publications

Does Liquidity Influence Profitability in Islamic Banks of Bahrain: An Empirical Study?

Does Liquidity Influence Profitability in Islamic Banks of Bahrain: An Empirical Study?

Navigating board dynamics: Configuration analysis of corporate governance’s factors and their impact on bank performance

Does board diversity reduce the likelihood of financial distress in the presence of a powerful Chinese CEO?

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