Impact of the Financial Crisis on Profitability of the Islamic Banks vs Conventional Banks- Evidence from GCC

Amba, Muni Sekhar; Almukharreq, Fayza

doi:10.5430/ijfr.v4n3p83

Cited by 30 publications

(18 citation statements)

References 10 publications

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“…The findings are consistent with previous evidence that supported the hypothesis that conventional banks are more profitable than Islamic banks. These findings are in line with the study by Amba and Almukharreq (2013), who found that in normal economic conditions, the conventional banks in the Gulf Cooperation Council (GCC) have outperformed the Islamic banks in term of bank margins.…”

Section: Summary Statisticssupporting

confidence: 90%

Efficiency and bank margins: a comparative analysis of Islamic and conventional banks in Yemen

Shawtari

Ariff

Razak

2019

JIABR

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Purpose The purpose of this paper is to examine the determinants of bank margins in the Yemeni banking sector for Islamic and conventional banks. The first objective is to investigate whether there is a significant difference between the margins of conventional and Islamic banks. The second objective is to examine whether efficiency represents an influential factor in determining bank margins for Islamic and conventional banks controlling for other micro and macro variables. Design/methodology/approach Using a data set of banks in Yemen for the post-liberalisation period from 1996 to 2011, the study utilises panel data with unbalanced observations for 16 banks, of which four are Islamic banks and the remainder conventional banks. Parametric and non-parametric techniques are complemented by dummy variable regression using random effects. Panel fixed effects regression was also undertaken as a robustness check. Findings The paper finds that the overall bank margin in Yemen has steadily decreased during the observation period with the exception of the year 2011. The parametric and non-parametric results show that the bank margins are significantly higher for conventional banks than for Islamic banks. The results provide evidence that bank margins are related to neither types of efficiency, but are affected by capitalisation, size, the opportunity cost of the reserve and liquidity, although the impact is shaped differently for Islamic and conventional banks. Practical implications The paper provides a basis for regulators and bankers for assessing the viability of the banking sector and proposes policies to restructure the industry to enhance its performance. Originality/value This paper adds value to the literature for the Yemeni banking sector and extends the previous research on the determinants of bank margins by focusing on the impact of efficiency on bank margins. Also, it compares the Islamic banks with different types of conventional banks in Yemen in their margins trend.

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Section: Summary Statisticssupporting

confidence: 90%

Efficiency and bank margins: a comparative analysis of Islamic and conventional banks in Yemen

Shawtari

Ariff

Razak

2019

JIABR

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“…Zeitun et al (2016) examine the impact of GFC 2008 on the capital structure for GCC firms, as they cover ten years for eight sectors to check the level of leverage ratio before and after the crisis, their findings indicate that the GFC has a negative impact on the leverage ratio due to the lack of debt supply by lenders. Amba and Almukharreq (2013) and Muda et al (2013) find a negative impact on performance during the crisis compared with the years before the crisis. Muda et al (2013) find the same impact of financial crisis on banks' profitability.…”

Section: Sales Nationality and Debt Financingmentioning

confidence: 95%

Sales nationality and debt financing impact on firm’s performance and risk

Al-Khasawneh

Dasouqi

2017

EMJB

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Purpose The purpose of this paper is to examine the impact of debt financing on both performance and systematic risk in Amman Stock Exchange listed firms. The authors focus the study to analyze the differences between services and industrial firms in one sense and the differences between international and domestic firms in the other sense, as the study depends on the geographical distribution of sales to classify the nationality of firms. Design/methodology/approach The study sample includes all listed Jordanian firms in Amman Stock Exchange from 2005 to 2013 for both industrial and services sectors. Using panel data techniques, fixed effects regression with modified Driscoll-Kraay standard error as a remedy for heteroscedasticity problem is employed. Findings The results show that there is a significant negative impact of debt financing on the firm’s performance, where the sector and the sales nationality play an important role. Moreover, the results indicate that there is a significant positive impact of debt financing on the firm’s systematic risk. Taking the sector and sales nationality into consideration, the authors find that the debt financing has no significant impact on the systematic risk of services firms and domestic firms. Additionally, the findings indicate that services firms and international firms are, on average, more riskier than industrial firms and domestic firms, respectively. Originality/value The paper provides a visibility on the comparison between international and local firms in Jordan in terms of the impact of debt financing on the financial performance and systematic risk in one research.

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“…There are banks profitability studies that focus only on Gulf Cooperation Council countries (GCC), the Middle East and North Africa (MENA) region or an individual Arab country 4 . Although these studies show that it is possible to conduct a meaningful analysis of bank profitability, there are few issues not dealt with sufficiently and estimated results could be biased (Al-Omar and Al-Mutairi, 2008, Bennaceur and Goaied, 2008, Amba and Almukharreq, 2013, Mokni et al, 2014, Alkhazaleh and Almsafir, 2014, Murthy Y and Al-Muharrami, 2014, Caporale et al, 2016, Ghosh, 2016, Abdullah et al, 2017. First, the literature principally considers determinants of profitability with no comprehensive selection for the variables set, countries in the sample under investigation and the short time dimension of the panels used in the estimation.…”

Section: Introductionmentioning

confidence: 99%

The Banks Profitability and Economic Freedom Quality: Empirical Evidence from Arab Economies

Aziz¹,

Knutsen²

2019

JBFE

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This study empirically examines the impact of economic freedom quality and global financial crisis on the banking sector profitability in the Arab region. The analysis is performed by employing system GMM estimation in panel data comprising of 14 Arab countries over the period 1985-2016. The study constructed an economic freedom index based on the economic freedom indicators. The findings indicate that greater economic freedom has positively influenced the profitability of the Arab banking sector. The results also suggest that the more profitable banks are those that have lower operating expenses against asset and income, better capitalized, more diversified and concentrated at economies having growth in the GDP. Furthermore, the global financial crisis in 2008 negatively impacted the profits of Arab banks.

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Impact of the Financial Crisis on Profitability of the Islamic Banks vs Conventional Banks- Evidence from GCC

Cited by 30 publications

References 10 publications

Efficiency and bank margins: a comparative analysis of Islamic and conventional banks in Yemen

Efficiency and bank margins: a comparative analysis of Islamic and conventional banks in Yemen

Sales nationality and debt financing impact on firm’s performance and risk

The Banks Profitability and Economic Freedom Quality: Empirical Evidence from Arab Economies

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