Financing modes, risk, efficiency and profitability in Islamic banks: Modeling for the GCC countries

Purpose This paper aims to explore empirically the impact of fair value accounting on banking contagion in a comparative context between Islamic banks and conventional banks. Design/methodology/approach The analysis of the impact of fair value changes on banking contagion is carried out through a panel data model. This study covers 20 Islamic banks and 40 conventional banks operating in the Gulf Cooperation Council (GCC) countries during nine years from 2003 to 2011. Findings Empirical evidence shows that there is a significant change in dynamic volatility in GCC banking sector because of financial crisis 2008. However, results fail to confirm the hypothesis that fair value accounting is significantly associated with an increase of banking contagion for both Islamic and conventional banks operating in GCC countries. Originality/value The outcome of this study provides some insights for academicians, accountants as well as regulators in terms of enhancing the effectiveness of accounting practices.

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Does bank governance affect risk and efficiency? Evidence from Islamic banks in GCC countries

International Journal of Islamic and Middle Eastern Finance and Management ◽

10.1108/imefm-05-2020-0206 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Samir Srairi ◽

Khawla Bourkhis ◽

Asma Houcine

Keyword(s):

Risk Management ◽

Financial Crisis ◽

Risk Taking ◽

Audit Committee ◽

Governance Structure ◽

Board Structure ◽

Islamic Banks ◽

Bank Efficiency ◽

Content Type ◽

Gcc Countries

Purpose The motivation of the study is to shed further light on the question of whether the governance structure of Islamic banks (IBs) has an impact on the efficiency and risk of Islamic banks operating in the Gulf Cooperation Council (GCC) after the global financial crisis and during the period 2010–2018. This study aims to examine the extent of governance structure on the efficiency and risk of IBs as the effect of the financial crisis has been less on IBs. In addition, the authors are interested in the GCC region as it represents the hub of Islamic finance. Design/methodology/approach In this study, the authors examine how the banking governance structure affects the risk-taking and performance of IBs in the GCC countries between 2010 and 2018. The authors construct a banking governance index (CGI) composed of sub-indices for the board structure, risk management, transparency and disclosure, audit committee, Sharia supervisory board and investment account holders. Unlike the majority of previous studies, bank performance is measured with technical efficiency scores using a data envelopment analysis and the authors use a comprehensive CGI. Findings The results show that IBs in GCC countries adhere to 54% of the attributes covered in the CGI. The authors also note a lack of disclosure regarding the investment account holders and the audit committee. As well, the results indicate that bank governance is positively associated with risk-taking and bank efficiency. Banking risk is influenced by the Sharia board and risk management while bank efficiency is affected by the characteristics of the board structure and investment account holders. Originality/value To the best of the authors’ knowledge, this is the first study that has developed a comprehensive governance index for IBs in GCC countries that includes a wide range of governance dimensions. The study contributes to the literature on governance in the banking sector by simultaneously examining its impact on the risk-taking and efficiency of IBs and recognizes the dynamic relation between these three variables for IB.

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Deposits structure, ownership concentration and corporate governance disclosure in GCC Islamic banks

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-10-2014-0034 ◽

2018 ◽

Vol 9 (4) ◽

pp. 587-606 ◽

Cited By ~ 1

Author(s):

Rihab Grassa

Keyword(s):

Corporate Governance ◽

Ownership Structure ◽

Far East ◽

Policy Implications ◽

Ownership Concentration ◽

Islamic Banks ◽

Content Type ◽

Gcc Countries ◽

Transparency And Disclosure ◽

Governance Disclosure

Purpose This paper aims to assess the effects of deposits structure and ownership structure on the GCC Islamic banks’ corporate governance disclosure (CGD) practices. Design/methodology/approach The study is based on a sample of 38 Islamic banks operating in five Gulf Cooperation Council (GCC) countries, and the authors observed them over the period from 2006 to 2011. The authors used the transparency and disclosure score, developed by Standard & Poor’s (S&P), to identify the sample’s CGD scores. Findings This paper’s findings suggest that the level of CGD is lower for Islamic banks with higher ownership concentration, for levered Islamic banks and for Islamic banks with greater concentration of nonprofit-sharing investment accounts (PSIA) and is higher for Islamic banks with greater concentrations of PSIA; the Islamic bank size; the bank age; listed bank and the country transparency index. By disaggregating the total CGD into the three sub-categories, the authors are able to specify, also, the components of corporate governance (CG) impacted by various determinants. Research limitations/implications This paper is subject to a number of limitations. First, there is manual scoring of annual reports (subjectivity). Second, the research focuses exclusively on the GCC context and excludes the other Middle East, Southeast Asia and Far East countries, where ownership structure and deposits structure might affect CGD differently. Third, the governance score, which is used in this research, is developed by S&P and does not take into account the characteristics of Islamic banks. Practical implications The findings of this paper suggest many policy implications. First, through the optimization of ownership structure, GCC countries’ regulators have to improve the Islamic banking system’s CG mechanisms through the optimization of ownership structure (dispersed ownership) to promote transparency and disclosure. Second, regulators and policymakers should revise guidelines with the main purpose of protecting PSIA’ holders (considered to be minor shareholders without voting power) through promoting disclosure and transparency. Third, the findings can be useful for many international supervisory bodies, like the Islamic Financial Services Board (IFSB) and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), in evaluating transparency and disclosure standards. Originality/value This study is expected to be useful for all market participants, namely, investors, financial analysts, managers, marker regulators and many international Islamic supervisory bodies, such as the IFSB and AAOIFI, by providing new requirements on CGD in the GCC region and in better understanding its determinants for Islamic banks in this region.

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The Effect of Financial Leverage on The Islamic Banks’s Performance in The Gulf Cooperation Council (GCC) Countries

International Journal of Financial Research ◽

10.5430/ijfr.v11n1p13 ◽

2019 ◽

Vol 11 (1) ◽

pp. 13

Author(s):

Abdesslam Menacer ◽

Abdulazeez Y. H. Saif-Alyousfi ◽

Nor Hayati Ahmad

Keyword(s):

Agency Cost ◽

The Other ◽

Islamic Banks ◽

Financial Leverage ◽

Gcc Countries ◽

Thomson Reuters ◽

Effect Regression ◽

Equity Ratio ◽

Earning Power ◽

The Impact

This study examines the impact of the financial leverage on the Islamic banks’ performance in the GCC countries during the period from 2005-2017. The population of this study included the Islamic banks in the GCC countries. Thirteen years data of 25 listed Islamic banks in the GCC countries were used, wereby these data were retrieved from the Thomson Reuters DataStream. This study utilized the fixed effect regression model. The findings show that the financial leverage a has significant impact on the performance of the Islamic banks’ performance in the GCC region. More specifically, the financial leverage has a positive and significant impact on ROA, ROE, and Tobin’s Q of the Islamic banks in the GCC countries, thus indicating that the higher is the financial leverage the higher is the performance of the Islamic banks in the GCC region. However, the results of this study do not provide evidence to support the Agency Cost Theory that implies a decrease in the performance when equity ratio is increased. On the other hand, the findings provide evidence to support the Signaling Theory that argues that banks are expected to have a better performance credibly in transmitting this information through the higher capital. The findings imply that the level of financial leverage committed by the Islamic banks depends on their flexibility in adjusting their debt value and earning power.

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Islamic Banking in GCC

Growth and Emerging Prospects of International Islamic Banking - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-7998-1611-9.ch001 ◽

2020 ◽

pp. 1-16

Author(s):

Eda Orhun

Keyword(s):

Financial Crisis ◽

Literature Review ◽

Performance Comparison ◽

Islamic Banking ◽

Islamic Banks ◽

Financial Products ◽

Gcc Countries ◽

Before And After ◽

Time Periods ◽

Conventional Banks

This chapter offers a literature review discussing the origin, history, and the growth of Islamic Banking, especially in the GCC countries. It provides detailed information regarding how Islamic Banking evolved throughout the years and what are the current Islamic financial products. Another interesting topic covered in this literature review is the performance comparison of Islamic and conventional banks during different time periods. Accordingly, the chapter explores how the financial standing of Islamic banks altered in comparison to conventional banks before and after the financial crisis of 2008 by presenting earlier studies from various countries. It is concluded that some potential challenges and future opportunities of the Islamic Banking are yet to be explored.

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DO ISLAMIC BANKS CONTRIBUTE TO ECONOMIC GROWTH? EVIDENCE FROM THE GCC COUNTRIES

International Journal of Economics and Financial Issues ◽

10.32479/ijefi.10046 ◽

2020 ◽

Vol 10 (5) ◽

pp. 352-360

Author(s):

Fatima Zahra Bendriouch ◽

Harit Satt ◽

Mohamed M’hamdi

Keyword(s):

Economic Growth ◽

Islamic Banks ◽

Gcc Countries

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Performance of Islamic banks

ISRA International Journal of Islamic Finance ◽

10.1108/ijif-05-2018-0054 ◽

2019 ◽

Vol 11 (2) ◽

pp. 303-321 ◽

Cited By ~ 3

Author(s):

Abdalmuttaleb Musleh Alsartawi

Keyword(s):

Negative Relationship ◽

Multiple Linear Regression Model ◽

Annual Reports ◽

Islamic Banks ◽

Return On Assets ◽

Content Type ◽

Gcc Countries ◽

Governance Model ◽

Supervisory Boards ◽

The Relationship

Purpose This paper aims to investigate the relationship between the composition of Sharīʿah supervisory boards (independence and frequency of meetings) and the performance of Islamic banks in the Gulf Cooperation Council (GCC) countries. Design/methodology/approach The study developed a multiple linear regression model, and data were collected from the annual reports of 48 standalone Islamic banks listed in the GCC countries covering the period between 2013 and 2017. Findings The results showed a statistically significant and negative relationship between the composition of the Sharīʿah supervisory boards and the performance of Islamic banks. Research limitations/implications As the current study used only one indicator, that is Return on Assets to measure performance, it is recommended to expand the framework of this study, through the addition of market-based performance indicators such as Tobin’s Q. Practical implications This study recommends the GCC countries to follow a more proactive Sharīʿah governance model to strengthen their frameworks from both regulatory and non-regulatory aspects. Originality/value The study contributes to the Sharīʿah governance and Islamic banking literature relating to the GCC countries as previous studies gave no attention to the composition of Sharīʿah supervisory boards.

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Efficiency Of Islamic Banks During Subprime Crisis: Evidence Of GCC Countries

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v29i1.7615 ◽

2013 ◽

Vol 29 (1) ◽

pp. 285 ◽

Cited By ~ 10

Author(s):

Zied Ftiti ◽

Olfa Nafti ◽

Safa Sreiri

Keyword(s):

Data Envelopment ◽

Subprime Crisis ◽

Panel Analysis ◽

Islamic Banks ◽

Font Size ◽

Macroeconomic Variables ◽

Explanatory Variables ◽

Islamic Bank ◽

Gcc Countries ◽

The Relationship

This paper investigates the efficiency of the Islamic bank in GCC countries around the subprime crisis of 2008. The score of efficiency is evaluated by using the Data envelopment approach (DEA). Two different approaches are evaluated; the constant return scale (CRS) and Variable return scale (VRS). Then, a regression panel analysis is employed to examine the relationship between efficiency scores derived from the DEA to a set of explanatory variables combined between macroeconomic variables and microeconomic variables. The main finding of this paper is to show that the Islamic bank remains efficient under subprime crisis.

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Are Profit Sharing Rates in Mudharabah Account Linked to Interest Rates? An Investigation on Islamic Banks in GCC Countries

Jurnal Ekonomi Malaysia ◽

10.17576/jem-2015-4902-07 ◽

2015 ◽

Vol 49 (2) ◽

pp. 77-86 ◽

Cited By ~ 4

Author(s):

Rosylin Mohd Yusof ◽

Mejda Bahlous ◽

Hamza Tursunov

Keyword(s):

Interest Rates ◽

Profit Sharing ◽

Islamic Banks ◽

Gcc Countries

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The Determinants of Islamic and Conventional Banks Profitability in the GCC Region

International Journal of Financial Research ◽

10.5430/ijfr.v12n3p78 ◽

2021 ◽

Vol 12 (3) ◽

pp. 78

Author(s):

Bassam Omar Ali Jaara ◽

Mohammad A. AL-Dahiyat ◽

Ismail AL-Takryty

Keyword(s):

Commercial Banks ◽

Bivariate Analysis ◽

Panel Regression ◽

Islamic Banks ◽

Return On Assets ◽

Factors Affecting ◽

Book Value ◽

Gcc Countries ◽

Conventional Banks ◽

Investigation Process

The purpose of this study is to examine the factors affecting the profitability levels of commercial banks whether Islamic and non-Islamic over the period 2000-2018, to suggest ways to enhance the Islamic and non-Islamic banks profitability levels’ in the GCC countries. This research employed Bivariate analysis and panel regression in the investigation process. The study employed return on assets ratio as a proxy for banks profitability. The study found out that conventional banks are more efficient than Islamic banks in terms of profitability levels. There are substantial variances between both Islamic and conventional banks in terms of the determinants of banks' profitability. It is found that 89% of the Islamic bank’s profitability and 85% of conventional banks profitability influenced by bank size, market to book value, capital ratio, cash to assets, gross domestic product GDP, GDP growth, and inflation.

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