Liquidity risk, credit risk and stability in Islamic and conventional banks

Hassan, M. Kabir; Khan, Ashraf; Paltrinieri, Andrea

doi:10.1016/j.ribaf.2018.10.006

Cited by 155 publications

(162 citation statements)

References 26 publications

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“…In model 1, the Z-score value is influenced by both Islamic bank's specific variables as well as macroeconomic variables. The large asset leads to Islamic bank to expand its business and create economies of scale so as to increase profits (Rahim & Zakaria, 2013;Hassan et al, 2019). CAR has a positive effect on the Z-score because the greater the CAR links to the better the Islamic banks to manage financing risk (Èihák & Hesse 2010;Miah & Uddin, 2017).…”

Section: Discussionmentioning

confidence: 99%

“…This period was selected due to the fast development of Islamic banks after the Indonesian government passed the Islamic bank law in 2008. We follow the existing empirical literature such as Beck et al (2013) and Hassan et al (2019). The stability of Islamic banks can be modeled as follows:…”

Section: Method Data and Analysismentioning

confidence: 99%

“…We measure stability using two methods, namely Z-score (Beck et al, 2013;Hassan et al, 2019) as well as Non-performing financing (NPF) (Abedifar et al, 2013;Kabir & Worthington, 2017). Z-score is estimated using a formula as (ROA+CAR)/ STDV(ROA).…”

Section: Method Data and Analysismentioning

confidence: 99%

“…Some researchers point out that the Islamic banks' stability is better than the conventional bank. Some plausible reasons are from the limited investment of Islamic bank because they have to meet the Sharia principles (Hussein, 2010), having better risk management (Hassan, Khan, & Paltrinieri, 2019) and having low credit risk because of no speculative transaction in their financing (Miah & Uddin, 2017). On another hand, some empirical literature indicates that the Islamic banks' stability is worse than conventional banks because moral hazard and asymmetric information bear on the profit-and-loss sharing system (Kabir, Worthington, & Gupta, 2015;Lassoued, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

Widarjono

2020

Jurnal Keuangan Dan Perbankan

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Islamic banks in Indonesia are very vulnerable to the instability of their business processes because of their small market share. Moreover, based on their financial performances, Islamic banks are worse than those of conventional banks due to lower profits (ROA) and higher Non-performing financing (NPF). Our study investigates the stability of Islamic banks. We measure the stability using Z-score and NPF. Instead of an individual bank, the study applies an aggregate data of Islamic banks encompassing Islamic commercial banks along with Islamic business units. Monthly time series data, covering January 2010 to December 2018 are selected. We apply the Autoregressive Distributed Lag (ARDL) model. The findings document that the Islamic bank's specific variables affecting stability are size, CAR, and efficiency. The larger size and CAR support the Islamic bank's stability. Lower efficiency increases the Islamic bank's instability. Meanwhile, Inflation and exchange rates affect the Islamic bank's stability. Economic downturns due to inflation and depreciation of rupiah increase the instability of Islamic banks. AbstrakBank Islam di Indonesia sangat rentan terhadap ketidakstabilan proses bisnis mereka karena pangsa pasar yang kecil. Selain itu, berdasarkan kinerja keuangan mereka, bank syariah lebih buruk daripada bank konvensional karena laba lebih rendah (ROA) dan pembiayaan bermasalah (NPF) lebih tinggi. Penelitian ini menyelidiki stabilitas bank Islam. Stabilitas keuangan diukur dengan menggunakan Z-score dan NPF. Penelitian ini menggunakan data agregat bank syariah yang mencakup bank komersial syariah bersama dengan unit bisnis syariah. Data yang digunakan adalah bulanan dari Januari 2010 hingga Desember 2018. Penelitian ini mengaplikasikan model Autoregressive Distributed Lag (ARDL). Temuan penelitian ini mendokumentasikan bahwa variabel spesifik bank Islam yang memengaruhi stabilitas adalah besarnya asset, CAR, dan efisiensi. Aset dan CAR yang tinggi mendukung stabilitas bank syariah. Efisiensi yang lebih rendah meningkatkan ketidakstabilan bank syariah. Sementara itu, inflasi dan nilai tukar memengaruhi stabilitas bank Islam. Penurunan ekonomi akibat inflasi dan depresiasi rupiah meningkatkan ketidakstabilan bank Islam.

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Section: Discussionmentioning

confidence: 99%

Section: Method Data and Analysismentioning

confidence: 99%

Section: Method Data and Analysismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

Widarjono

2020

Jurnal Keuangan Dan Perbankan

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“…Abedifar et al (2013) found that in general, small IBs in majority Muslim states had a lower credit risk than did CBs of a similar size. Most recently, Hassan et al (2019) published a study on the relationship between liquidity and credit risk by using a simultaneous structural equation approach to 52 IBs and CBs for the period of 2007-2015. They observed that credit risk and liquidity risk have a negative relationship for CBs and for IBs, whereas a negative relationship between liquidity risk and stability is observed only for IBs.…”

Section: Risk Management Of Islamic Banks (Ibs)mentioning

confidence: 99%

Developments in Risk Management in Islamic Finance: A Review

Rahahleh

Bhatti

Misman

2019

JRFM

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The purpose of this study is to review recent developments pertaining to risk management in Islamic banking and finance literature. The study explores the fundamental features of risks associated with Islamic banks (IBs) as compared to those associated with conventional banks (CBs) in order to determine the extent to which IBs engage in effective risk mitigation. The study includes a consideration of the major studies in which the fundamental features of Islamic banks and finance (IBF) and the main characteristics of risk management in IBs are analyzed in comparison with those of CBs. Specifically, these two kinds of banks are compared in relation to the types of risks faced, the characteristics of those risks, and the nature and extent of exposure to those risks. A tabular methodology approach is used in concert with a comparative literature review approach for the analysis. The results show that there is weak support for Shariah-based product development due to the lack of risk mitigation expertise in IBs. The conclusion presented is that in comparison with CBs, IBs are more risk-sensitive due to the nature of their products, contract structure, legal costing, governance practices, and liquidity infrastructure. Furthermore, the determinants of the credit risk of Islamic banks in Malaysia (MIBs) are examined. Overall, bank capital and financing expansion have a significant negative impact on the credit risk level of IBs in Malaysia.

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The impact of competition on environmental and social performance in the MENA banking sector

Maside‐Sanfiz,

Iglesias‐Casal,

Mazahreh

et al. 2024

Corp Soc Responsibility Env

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The study analyzes the impact of competition on environmental and social performance. Based on data collected from 82 banks in the banking industry across nine emerging Middle Eastern and North African (MENA) countries from 2015 to 2021, the results indicate that heightened competitive pressure compels banks to enhance their efforts in environmental and social initiatives. Additionally, a positive correlation is observed between greater Board gender diversity (BGD) and improved environmental and social performance. Finally, the results indicate that the negative impact of market power on environmental and social performance is less pronounced in banks with higher BGD, those operating in countries with a better institutional environment, and in state‐owned banks. In contrast, the negative impact is more pronounced in Islamic banks. Our research findings provide insights into the current discourse on strategic decision‐making in the context of sustainability, shedding light on the benefits associated with competition and gender diversity.

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Liquidity risk, credit risk and stability in Islamic and conventional banks

Cited by 155 publications

References 26 publications

Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

Stability of Islamic banks in Indonesia: Autoregressive Distributed Lag Approach

Developments in Risk Management in Islamic Finance: A Review

The impact of competition on environmental and social performance in the MENA banking sector

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