Leverage made at home: Investors' margin loan usage and firm leverage

Liu, Chunbo; Niu, Zilong

doi:10.1016/j.ememar.2023.101010

Emerging Markets Review

2023

DOI: 10.1016/j.ememar.2023.101010

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Leverage made at home: Investors' margin loan usage and firm leverage

Chunbo Liu

Zilong Niu

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2023

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The impact of banks’ capital buffer on equity return: evidence from Islamic and conventional banks of GCC countries

Farooq,

Miah,

Kabir

et al. 2023

JIABR

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Purpose This paper aims to examine the impact of bank’s capital buffer on return on equity (ROE) in the context of Islamic and conventional banks in GCC countries. Design/methodology/approach The authors collect data from 83 commercial banks comprising of 49 conventional banks and 34 Islamic banks for the period 2010–2019. The final data set comprises of 744 bank-year observations. The authors apply generalized methods of moments estimation technique and panel least square to analyze the data. Findings The authors document that Tier-1 capital, total regulatory capital (TRC) and equity to asset ratio (EAR) negatively affect banks’ ROE. However, the impact disappears for conventional banks and sustains for Islamic banks if these two clusters of banks are treated separately. Furthermore, the negative impact of equity capital on earning is more pronounced for large and listed commercial banks. Practical implications Findings of this research imply that Islamic banks in GCC countries has scope to manage equity capital more efficiently. Hence, they should concentrate on using banks equity wisely to successfully compete with the conventional banks. Originality/value Since the global financial crisis of 2009, Islamic banks of GCC countries have been reporting lower ROE compared to their conventional counterparts. On the other hand, Islamic banks maintain higher level of Tier-1 capital, TRC and EAR. This evidence hypothetically suggests that Islamic banks are overly cautious in managing their capital buffer that results in lower ROE. To the best of the author’s/authors’ knowledge, no other study in the literature tests this hypothesis in the GCC context.

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The impact of banks’ capital buffer on equity return: evidence from Islamic and conventional banks of GCC countries

Farooq,

Miah,

Kabir

et al. 2023

JIABR

View full text Add to dashboard Cite

show abstract

scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.

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Leverage made at home: Investors' margin loan usage and firm leverage

Cited by 1 publication

References 29 publications

The impact of banks’ capital buffer on equity return: evidence from Islamic and conventional banks of GCC countries

The impact of banks’ capital buffer on equity return: evidence from Islamic and conventional banks of GCC countries

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