Using partial least square discriminant analysis to distinguish between Islamic and conventional banks in the MENA region

Abstract

The deterioration of bank profitability poses a threat not only to the interests of consumers and internal staff members but also affects investors who may equally suffer from significant financial losses. It is important to establish an effective system which assists investors in their investment choices. In prior literature, traditional models have been developed, but achieved short‐term performances such as logistic regression and discriminant analysis. This paper applies a partial least squares discriminant analysis (PLS‐DA) to distinguish between conventional and Islamic banks in the Middle East and North Africa (MENA) region based on the financial information for the period 2005–2011. This method can successfully identify the non‐linearity and correlations between financial indicators. The results demonstrate superior performance of the proposed method. On one hand, our model can select all financial ratios to distinguish between banks and at the same time identify the most important variables in the distinction process. On the other hand, the proposed model has high levels in terms of accuracy and stability.

Institutional Investors and Public Authority Ownership Impact on Green Bonds Issue: Evidence from France

“…The use of partial least squares (PLS) is gaining more attention in social science such as marketing (Danks et al, 2020;Dash, Paul, 2021), information systems (AlNuaimi et al, 2021;Barrett et al, 2021) and finance (Jabeur, 2017;Jabeur et al, 2021;Sghaier et al, 2018). PLS univariate regression is a model that links a dependent variable y to a collection of independent variables.…”

Asya Ülkelerinin Beklenen Yaşam Süresi Bakımından Sınıflandırılmasında Etkili Olan Sosyoekonomik Değişkenlerin Kısmi En Küçük Kareler Diskriminant Analizi ile Belirlenmesi

“…Sghaier vd. [12], 2005-2011 dönemine ait finansal bilgilere dayanarak Orta Doğu ve Kuzey Afrika (MENA) bölgesindeki geleneksel ve İslami bankaları ayırmak için KEKKDA yöntemini uygulamıştır. Yoon ve Klasen [13], OECD tarafından üretilen bileşik bir endeks olan Sosyal Kurumlar ve Cinsiyet Endeksi'ni (SIGI), Temel Bileşenler Analizi (TBA) ve KEKK tarafından üretilen ağırlıkları kullanılarak yeniden oluşturmuştur.…”