scholarly journals The effect of audit committee quality on the conventional and Islamic banks' financial performance between subprime and Corona crises

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Achraf Haddad ◽  
Anis El Ammari ◽  
Abdelfattah Bouri
Keyword(s):  
Financial Performance ◽  
Audit Committee ◽  
Evaluation Method ◽  
Positive Impact ◽  
Annual Reports ◽  
Subprime Crisis ◽  
Islamic Banks ◽  
Content Type ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

PurposeThis study aims to test empirically the differences between Islamic and conventional banks in terms of impacts of the audit committees' quality on financial performance between Subprime and Corona crises.Design/methodology/approachThe variables are articulated in four hypotheses tested by the GLS analysis. The data were collected via DATASTREAM and from banks' annual reports. The collected data covered four continents: America, Asia, Africa and Europe. The financial performance measures and audit committee's determinants of the conventional and Islamic banks concerned 112 banks of each type after the Subprime crisis and before the Corona crisis (2010–2019).FindingsResults showed that the audit committee reduced the profitability of two bank types. Moreover, it harmed the conventional banks' efficiency, but reported an unclear effect within Islamic banks. Even so, the authors noticed that the audit committee had a positive impact for the conventional banks' liquidity, while the same effect was apparently ambiguous on the Islamic banks' liquidity. For solvency, the audit committee positively influenced conventional banks, while it affected that of Islamic banks.Research limitations/implicationsEmpirically, the authors’ results can serve as a reference for decision-makers allowing to clarify the data on the financial competitiveness of two bank types to facilitate the planning of strategic performance programs based on the audit committee quality. Theoretically, researchers found that the differences between the results are due to the audit committee quality of each bank type or to the financial performance evaluation method. However, there are further factors that are related to the research peculiarities, the methodology, the data and the interpretation.Originality/valueBased on the comparative literature review between conventional and Islamic banks, this study is the first conditional and comparative research between the audit committee quality and the financial performance of conventional and Islamic banks in a specific period (after Subprime and before Corona crises).

scholarly journals Impact of Audit Committee Quality on the Financial Performance of Conventional and Islamic Banks

2021 ◽  
Vol 14 (4) ◽  
pp. 176
Author(s):  
Achraf Haddad ◽  
Anis El Ammari ◽  
Abdelfattah Bouri
Keyword(s):  
Financial Performance ◽  
Audit Committee ◽  
Evaluation Method ◽  
Positive Impact ◽  
Generalized Least Squares ◽  
Audit Committees ◽  
Subprime Crisis ◽  
Islamic Banks ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

A lot of previous research studied the relationship between audit committee quality and the financial performance of conventional banks before and during the subprime crisis, whereas some other investigations analyzed the same association in the framework of Islamic banks. However, no study has compared these two correlations either before, during, or after the subprime crisis. Several reasons explain the differences, such as the audit committee quality of each bank type, the evaluation method of the financial performance, the research peculiarities, the methodology, the data, and the interpretation. This research aims to compare the impacts of the audit committees’ quality on the financial performance of Islamic and conventional banks between 2010 and 2019. The financial performance measures and audit committees’ determinants of the conventional and Islamic banks concerned 112 banks of each type. The collected data covered four continents: America, Asia, Africa, and Europe. Impacts were compared by using the Generalized Least Squares analysis. The results showed that the audit committee reduced the profitability of two bank types. Moreover, it harmed the conventional banks’ efficiency but reported an unclear effect within Islamic banks. Even so, we noticed that the audit committee had a positive impact on the conventional banks’ liquidity, while the same effect was apparently ambiguous for the Islamic banks’ liquidity. For solvency, the audit committee positively influenced conventional banks while it affected that of Islamic banks.

Does service quality increase the level of banks performance

2019 ◽  
Vol 38 (6) ◽  
pp. 442-454 ◽  
Author(s):  
Syed Faraz Ali ◽  
Muhammad Naeem
Keyword(s):  
Service Quality ◽  
Multiple Regression ◽  
Positive Impact ◽  
Quality Parameters ◽  
Cluster Sampling ◽  
Islamic Banks ◽  
Content Type ◽  
Banking Systems ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Purpose The purpose of this paper is to unfold the relationship between service quality and level of performance of conventional and Islamic banks. Also, it intends to uncover what are the features of service quality which can raise the level of performance either in conventional banks or Islamic banks. There is rare literature available that focused on comparative study between above stated banking systems based on emerging parameters of SERVQUAL model. Design/methodology/approach To meet the objectives of this investigation, research data has been from 450 customers who have had accounts and dealings with conventional and Islamic banks in the previous five years. The customers are selected based on cluster sampling from regional offices of conventional and Islamic banks. Findings The collected data have been analyzed by using confirmatory factor analysis (CFA) technique followed by common method variance (CMV), multiple regression test and independent sample t-test used to examine the parameters of service quality in the context of banks performance. The purpose of CFA is to find the model validity, while multiple regression and t-test is performed in order to examine the influence of service quality parameters on banks performance. Originality/value The study used compliance as a one of the emerging and unique dimension of service quality. This dimension is rarely investigated in the context of measuring the level of bank performance of conventional and Islamic banking systems. Findings reveal responsiveness and assurance is the strongest predictor of conventional banking performance. Compliance and reliability has significant and positive impact on the level of performance of Islamic banks. Moreover, the study has practical implications for the top management and stakeholders of conventional and Islamic banks to increase the level of performance by using SERVQUAL model.

scholarly journals The association between intellectual capital and financial performance in the Islamic banking industry

2019 ◽  
Vol 13 (1) ◽  
pp. 75-93 ◽  
Author(s):  
A.A. Ousama ◽  
Helmi Hammami ◽  
Mustafa Abdulkarim
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Positive Impact ◽  
Value Added ◽  
Annual Reports ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Gcc Countries ◽  
The Impact

Purpose The purpose of this study is to empirically investigate the impact of intellectual capital (IC) on the financial performance of Islamic banks operating in the Gulf Cooperation Council (GCC) countries. Design/methodology/approach The study measures IC by the value added intellectual coefficient model. A regression analysis was used to assess the impact of IC on financial performance. The research sample consisted of Islamic banks operating in the GCC countries during the years 2011, 2012 and 2013. Data originated from the annual reports of Islamic banks. Findings The results support the thesis that IC has a positive impact on the financial performance of Islamic banks. Even though the average IC is lower than that reported in other studies, the positive effect on financial performance is obvious. The findings also show that human capital (HC) is higher than capital employed (CE) and structural capital (SC). The study reveals that SC has an insignificant impact on the financial performance of the Islamic banks compared to CE and HC. Practical implications The findings provide empirical evidence that IC affects the Islamic banks’ financial performance. It helps Islamic banks in the GCC countries to understand how to use their IC efficiently, especially SC as it is yet to be used efficiently. Also, the findings benefit the relevant authorities (e.g. legislators and central banks) who could use them to emphasise strategic policy reforms whenever required. Originality/value The current research adds to the empirical studies in the GCC countries as it views the region as a collective as opposed to individual countries. It also extends the IC and performance measurement literature of Islamic banks in the GCC countries. Moreover, the current study enriches the limited literature on IC in the context of Islamic banking.

Does the country’s religion affect the financial performance of conventional and Islamic banks? Comparative study in the international framework

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Achraf Haddad ◽  
Achraf Haddad
Keyword(s):  
Financial Performance ◽  
Generalized Method Of Moments ◽  
Developed Countries ◽  
Emerging Countries ◽  
Islamic Banks ◽  
Governance Mechanism ◽  
Content Type ◽  
Conventional Banks ◽  
The Impact ◽  
Conventional And Islamic Banks

Purpose The purpose of this study is to compare the impact of religion on the financial performance of conventional and Islamic banks in the framework of stakeholders’ theory. Design/methodology/approach Few studies have focused on studying the impact of religion on banking performance. Although religion represents an external governance mechanism for financial institutions, by using the generalized method of moments (GMM), this topic constitutes a research opportunity. The already modeled variables are collected from 76 countries located on 5 continents. The data were collected from DATASTREAM, banks’ annual reports, WIKIPEDIA and World Bank. It concerns 210 banks of each type during the period (2010–2020). Findings The author retained that religion negatively affects the financial performance of both conventional and Islamic banks. More specifically, results showed that religion affected the liquidity and solvency of two bank types. It also affected conventional banks’ profitability and efficiency of conventional banks. Research limitations/implications I summarized the theoretical contribution in the integration of a new original governance category to enhance its presence with impacts directly affecting the banks’ financial performance. Empirically, the study can be seen as a compass for all stakeholders to consider environmental, behavioral and doctrinal factors in studying the financial performance evolution and to become more competitive in the banking market. Originality/value Although conventional banks located in developed countries are different from those existing in emerging countries and Islamic banks located in developed countries are different from those existing in emerging countries, I carried out a diversified study in the global context. Referring to the comparative literature review between conventional and Islamic banks, the study was the first conditional research that compared the impacts of religion on the financial performance of conventional and Islamic banks.

scholarly journals Effect of board quality on the financial performance of conventional and Islamic banks in a stable financial context: Comparative study on the international evidence

2020 ◽  
Author(s):  
Achraf HADDAD ◽  
Anis EL AMMARI ◽  
Abdelfattah BOURI
Keyword(s):  
Financial Performance ◽  
Board Of Directors ◽  
Positive Impact ◽  
Main Role ◽  
Islamic Banks ◽  
The Board Of Directors ◽  
Internal Mechanism ◽  
Conventional Banks ◽  
The Impact ◽  
Conventional And Islamic Banks

Abstract Returning to the literature of finance and banking governance, our article provides the first logical analysis that detailed the process of comparative analysis between the correlation of board determinants’ quality and the financial performance of conventional and Islamic banks. Previous research has always discussed the main role of the board as an internal mechanism of governance on the financial performance separately in each bank type. However, we have never encountered rewarding studies that compared these impacts. In our study, we distinguished between the impact of the board of directors on the financial performance in conventional and Islamic banks. Settings of the financial performance and board of directors of the conventional and Islamic banks are collected from 30 countries located in four continents: America, Europe, Asia, and Africa. Two equal samples were collected that each of them is composed of 112 banks. By using the GLS method, data were used to explore the impact of the board of directors on the financial performance between both types of banks over the period 2010-2018, giving us 1008 bank-year observations in each sub-sample. On the whole, empirical results have shown that in conventional banks the board of directors has negatively affected the financial performance, while the impact of the board on the financial performance of Islamic banks is ambiguous. Nevertheless, the degree of the positive impact on financial performance is more significant in Islamic banks.

scholarly journals Overcoming the comparative confusion of the audit committee’s impact on the financial performance of conventional and Islamic banks: An international evidence in a framework of agency theory

2021 ◽  
Vol 6 (3) ◽  
pp. 55-90
Author(s):  
Achraf Haddad ◽  
Mohamed Naceur Souissi ◽  
Abdelfattah Bouri
Keyword(s):  
Panel Data ◽  
Financial Performance ◽  
Agency Theory ◽  
Audit Committee ◽  
Islamic Banks ◽  
International Evidence ◽  
Secondary Role ◽  
Conventional Banks ◽  
Theoretical Foundations ◽  
Conventional And Islamic Banks

Based on the banking and governance literature, the impacts of the audit committee quality on the financial performance of conventional and Islamic banks are mixed, unstable and sometimes contradictory. In this study, we consulted deeply the theoretical foundations of the audit committee quality on the financial performance of conventional and Islamic banks to solve the ambiguity of comparison in a framework of agency theory. Measures of financial performance and audit committee determinants are collected from 30 countries. Under the panel data estimations, data were collected from 112 banks of each type that have published their reports regularly during the period (2010-2019). Overall, we obtained 1120 bank-year observations in each sub-sample. The results showed that the audit committee in conventional banks negatively affected their financial performance. However, in Islamic banks, it revealed a vague impact because of his secondary role.

Risk, efficiency and financial performance in the GCC banking industry: Islamic versus conventional banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sutan Emir Hidayat ◽  
Muhammad Rizky Prima Sakti ◽  
Raqiya Ali Abdullah Al-Balushi
Keyword(s):  
Adverse Effects ◽  
Credit Risk ◽  
Financial Performance ◽  
Risk Sharing ◽  
Banking Industry ◽  
Islamic Banks ◽  
Content Type ◽  
Bank Managers ◽  
Conventional Banks ◽  
Conventional And Islamic Banks

Purpose The purpose of this study is to critically evaluate how conventional and Islamic banks trade off risk, efficiency and financial performance in their business models, to investigate how patterns of risk and efficiency vary between conventional and Islamic banks and to critically evaluate how the profitability of conventional and Islamic banks varies following the financial crisis. Design/methodology/approach This study uses univariate and multivariate statistical techniques by investigating 12 Islamic banks and 34 conventional banks operating in the Gulf Cooperation Council (GCC) region has been studied over the period 2011–2018. Findings The results suggest that Islamic and conventional banks differ not in the levels of efficiency, risk and profitability, but rather in how risk and efficiency influence banks’ financial performance. Islamic banks are found to be less influenced by the adverse effects of credit risk, which is consistent with the risk-sharing nature of Islamic financing. However, the results only hold for return on assets (ROA) and return on equity (ROE) while the net interest margin is observed to be negatively influenced by credit risk. Lower cost-income efficiency is also found to boost ROA and ROE of Islamic banks which could be attributed to a larger share of non-interest revenues due to Sharīʿah-compliance. Research limitations/implications From a theoretical point of view, this study helps to understand the risk, efficiency and financial performance of Islamic banks in comparison with conventional banks. Practical implications The results of this study can serve bank managers, regulators and shareholders. Policymakers should encourage a more risk-sharing structure of Islamic financing as it brings less adverse effects of credit risk and increases income sustainability for Islamic banks. The present study may help bank managers to improve the financial performance of their firms by controlling risk and efficiency. The study results also have implications for shareholders and depositors of Islamic and conventional banks as they should have a predetermined position about the level of credit risk and efficiency in each banking system. Originality/value The foremost contribution is that this is one of the few studies to compare risk, efficiency and financial performance of Islamic and conventional banks in the GCC region. By using the latest data, this paper hopes that the findings will be more relevant than previous studies to the current situation of the banking industry in the region.

scholarly journals Effect of board quality on the financial performance of conventional and Islamic banks: Comparative study on the international evidence

2020 ◽  
Author(s):  
Achraf HADDAD ◽  
Anis EL AMMARI ◽  
Abdelfattah BOURI
Keyword(s):  
Financial Performance ◽  
Board Of Directors ◽  
Positive Impact ◽  
Cylindrical Panel ◽  
Islamic Banks ◽  
International Evidence ◽  
The Board Of Directors ◽  
Conventional Banks ◽  
The Impact ◽  
Conventional And Islamic Banks

Abstract This article provides the first logical analysis that detailed the process of comparative analysis between the correlation of board determinants’ quality and the financial performance of conventional and Islamic banks. However, in previous research, we have never encountered rewarding studies that compared these impacts. In our study, we distinguished between the impact of the board of directors on the financial performance in conventional and Islamic banks. Settings of the financial performance and board of directors of the conventional and Islamic banks are collected from 30 countries located in four continents: America, Europe, Asia, and Africa. Two equal samples were collected that each of them is composed of 112 banks. By using the cylindrical panel method, data were used to explore the impact of the board of directors on the financial performance between both types of banks over the period 2010-2018, giving us 1008 bank-year observations in each sub-sample. On the whole, empirical results have shown that in conventional banks the board of directors has negatively affected the financial performance, while the impact of the board on the financial performance of Islamic banks is ambiguous. Nevertheless, the degree of the positive impact on financial performance is more significant in Islamic banks.

Does corporate governance affect the performance of Islamic banks? New insight into Islamic countries

2020 ◽  
Vol 20 (6) ◽  
pp. 1073-1090 ◽  
Author(s):  
Ejaz Aslam ◽  
Razali Haron
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Positive Impact ◽  
Islamic Banks ◽  
Governance Mechanism ◽  
Method Of Moment ◽  
Content Type ◽  
Return On Equity ◽  
Islamic Countries ◽  
And Performance

Purpose Corporate governance plays a significant role to overcome agency issues and develop the culture of transparency and openness. In this context, this paper aims to examine how corporate governance mechanisms affect the performance of Islamic banks (IBs). Design/methodology/approach Stepwise, two-step system generalize method of moment estimation technique is used in the analysis in which control variables are added into the model sequentially. This study used data on 129 IBs from 29 Islamic countries (Middle East, South Asia and Southeast Asia) during the period of 2008 to 2017. Findings The findings suggest that the audit committee (AUDC) and Shariah board (SB) have positive impact on the performance of IBs (return on assets and return on equity). However, board size and risk management committee have negative and significant effect on the performance of IBs. CEO duality and non-executive directors have mixed relationship with the performance of IBs. These results support the argument that IBs need to improve their financial performance through appropriate governance mechanism. Research limitations/implications The findings of the study added a new dimension to the governance research that could be a valuable source of knowledge for policymakers and regulators to improve the existing governance mechanism for better performance of IBs. Originality/value The study fills the gap in the literature by addressing the issue of corporate governance on performance of IBs across countries. Agency theory is discussed to explain the relationship between corporate governance mechanism and performance.

Is Islamic bank profitability driven by same forces as conventional banks?

2016 ◽  
Vol 9 (1) ◽  
pp. 46-66 ◽  
Author(s):  
Hajer Zarrouk ◽  
Khoutem Ben Jedidia ◽  
Mouna Moualhi
Keyword(s):  
Dynamic Panel Data ◽  
Islamic Banking ◽  
Subprime Crisis ◽  
Islamic Banks ◽  
Mena Region ◽  
Bank Profitability ◽  
Content Type ◽  
Large Sample ◽  
Islamic Bank ◽  
Conventional Banks

Purpose The purpose of this paper is to ascertain whether Islamic bank profitability is driven by same forces as those driving conventional banking in the Middle East and North Africa (MENA) region. Distinguished by its principles in conformity with sharia, Islamic banking is different from conventional banking, which is likely to affect profitability. Design/methodology/approach The paper builds on a dynamic panel data model to identify the banks’ specific determinants and the macroeconomic factors influencing the profitability of a large sample of 51 Islamic banks operating in the MENA region from 1994 to 2012. The system-generalized method of moment estimators are applied. Findings The findings reveal that profitability is positively affected by banks’ cost-effectiveness, asset quality and level of capitalization. The results also indicate that non-financing activities allow Islamic banks to earn higher profits. Islamic banks perform better in environments where the gross domestic product and investment are high. There is evidence of several elements of similarities between determinants of the profitability for Islamic and conventional banks. The inflation rate, however, is negatively associated with Islamic bank profitability. Practical Implications The authors conclude that profitability determinants did not differ significantly between Islamic and conventional banks. Many factors are deemed the same in explaining the profitability of conventional as well as Islamic banks. The findings reported in the current paper might be of interest for policy makers. It is recommended to better implement non-financing activities to improve Islamic bank profitability. Originality/value Unlike the previous empirical research, this empirical investigation assesses the issue whether Islamic banks profitability is influenced by same factors as conventional model. It enriches the literature in this regard by considering the specificities of Islamic banking to identify the determinants of profitability. Moreover, this study considers a large sample (51 Islamic banks) through a different selection of countries/banks than previous studies. In addition, the period of study considers the subprime crisis insofar it ranges from 1994 to 2012. Hence, this broader study allows the authors to draw more consistent conclusions.

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