State ownership and bank performance: conventional vs Islamic banks

Abstract

Purpose This paper aims to examine the effect of state ownership on bank performance for all banks in the Gulf Cooperation Council (GCC) countries during the period 2003 – 2018, for two distinct banking systems: the conventional and the Islamic banking systems. Design/methodology/approach To achieve the goal of the study, this paper uses a mean t-test to examine the mean difference of the related variables for both banking systems, and a regression test (using the GMM method) to explore the effect of state ownership on bank performance. Findings The most important result of the analysis is that state ownership has a significantly positive influence on bank performance for conventional banks but not for Islamic banks, in the GCC area. Originality/value This study adds to the scarce related literature comparative empirical results with respect to the impact of ownership on the performance of two different banking systems: the conventional system and the Islamic banking system in the GCC area. This study is likely to have implications for policymakers in terms of developing rules relevant to the governance of GCC’s two banking systems that can help to support the stability of the whole banking sector.

Determinants of Financial Performance in the Banking Sector: A Case Study of Listed Kuwaiti Banks

“…Bank size is measured by calculating the natural logarithm of total assets. Most previous studies confirm that large banks are more profitable than smaller-sized banks (Alharthi, 2017b;Alshammari, 2021;Başar et al, 2021;Boussaada & Hakimi, 2021;Rehman, Aslam, & Iqbal, 2022;Saadaoui & Mokdadi, 2022). In contrast, a few studies argue that a smaller total assets value leads to larger earnings (Al-Matari, 2021).…”

“…Examples are the studies by Alshammari (2021) and Saif-Alyousfi and Saha (2021) on GCC countries, and the study by Sahyouni and Wang (2019) on countries in the Middle East and North Africa (MENA) region. Conversely, Alharthi (2017a) and Manlagñit (2011) found that loan intensity decreases profits significantly.…”

“…Banks entice clients to deposit more money to increase the lending capability of the bank. Alshammari (2021), Haddad and Alali (2021) and Azam and Siddiqui (2012) presented evidence that deposit volume efficiently impacts profitability in the banking sector. However, Başar et al (2021) posit that the impact of deposit volume on the profits of banks is significant and negative.…”

“…Therefore, this study examines the impact of the COVID-19 pandemic on profitability in the Kuwaiti banking sector. There are many studies in the literature that examine the determinants of profitability in the banking sector (Al-Matari, 2021;Alshammari, 2021;Boussaada & Hakimi, 2021;Haddad & Alali, 2021) but none of these studies examine the effects of the COVID-19 pandemic on the profitability of banks. Thus, this study explores the correlation between the COVID-19 pandemic and the profitability of banks listed on Boursa Kuwait, the Kuwaiti stock exchange.…”

The Effect of Firm-Specific Risk and Macro Economic Factors on The Performance of Islamic and Conventional Bank

“…First, macroeconomic factors by considering financing, operational and liquidity risks. Second, comparisons between Islamic banks and conventional banks are carried out due to differences in the operational systems of each bank, and third consider adding a standard deviation indicator of profitability for three years as income uncertainty due to operating expenses in testing the influence of operational risk (Hidayat et al, 2021), (Alshammari, 2021), (El-Chaarani et al, 2022), (Lebdaoui & Chetioui, 2020) dan (Akkas & Asutay, 2022). These differences will be evaluated based on two main characteristics, namely firmspecific risk and macroeconomic factors faced by the two groups of banks and their impact on performance in terms of profitability, so as to increase the performance of Islamic banks in particular those still affected by the COVID-19 crisis.…”