Risk sharing vs risk shifting: a comparative study of Islamic banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sunil Khandelwal ◽  
Khaled Aljifri
Keyword(s):  
Risk Sharing ◽  
Time Series Data ◽  
Series Data ◽  
Risk Shifting ◽  
Islamic Banks ◽  
Content Type ◽  
Significant Difference ◽  
Noticeable Improvement ◽  
Islamic Financial Institutions ◽  
Earning Quality

Purpose This study aims to compare the use of risk-sharing and risk-shifting contracts (RSFCs) in Islamic banks using a triple grouping of conservative, moderate and liberal Islamic banks based on the Khaled Khandelwal (KK) model. Six fundamental Islamic contracts are used in this study, namely, Mushãrakah, Mudãrabah, Murãbaha, Salam, Ijãrah, Istisnã. Mushãrakah and Mudãrabah represent profit and loss sharing contracts (i.e., risk-sharing contracts – RSHCs), whereas Murãbaha, Salam, Ijãrah and Istisnã represent RSFCs. This study extends the previous studies by addressing an issue that has been neglected in the literature. The extent to which the two groups of contracts are used is extremely important because of its effect on the valuation of Islamic banks and on their earning quality. Design/methodology/approach This study aims to analyze, using descriptive statistics and inferential statistics, the use of RSHCs and RSFCs made by 72 fully Islamic banks, using a sample that includes banks in most of the countries where Islamic banks are present. Only fully Islamic Banks were considered, that is, banks that are essentially mainstream banks; therefore, banks that include only a specific line of Islamic products, often called the Islamic Window, were excluded. The total number of the sample was 118, but the study was restricted to 72 banks due to the availability of time series data covering the period of study, 2007 to 2015. Findings The study documents that over the period 2007 to 2015 the moderate banks have better distribution and balance of RSHCs and RSFCs than the conservative and liberal banks. The conservative banks are found to depend greatly on RSFCs, whereas the liberal banks are found to depend almost completely on RSFCs. Unexpectedly, the conservative banks have not shown a noticeable improvement over the period of analysis on their level of reliance on RSHCs. The results show that there is a significant difference in the percentage income distribution of the two contracts between the moderate banks and the conservative banks and between the moderate banks and the liberal banks. However, no significant difference was found between the conservative banks and the liberal banks. Originality/value The study uses an alternate rating model for Islamic financial institutions. The study examined the issue of risk sharing and risk shifting contracts usage in banks for a long period of nine years and at a global level and with an additional dimension of three categories of Islamic Banks based on the KK model.

Using social welfare concepts to guarantee Islamic banks’ deposits

2015 ◽  
Vol 8 (2) ◽  
pp. 134-149 ◽  
Author(s):  
Bassam Mohammad Maali ◽  
Muhannad Ahmad Atmeh
Keyword(s):  
Social Welfare ◽  
Risk Sharing ◽  
Income Smoothing ◽  
Islamic Banking ◽  
Investment Risk ◽  
Risk Shifting ◽  
Islamic Banks ◽  
Content Type ◽  
The Social ◽  
Islamic Financial Institutions

Purpose – The purpose of this paper is to examine the use of the social welfare concepts of Takaful and Tabarru’ (donations) as tools to guarantee deposits in the Islamic banking industry, and the effect of such practice on the concept of risk sharing in Islamic finance. Design/methodology/approach – The study critically analyzes the Mudaraba contract used by Islamic banks to mobilize funds, the use of Profit Equalization Reserves and Investment Risk Reserves, the use of other income smoothing techniques and the insurance of Islamic banks’ by regulatory agencies in some countries based on the Takaful and Tabarru’ concepts. Findings – This paper shows that Islamic banks are increasingly using the concepts of Takaful and Tabarru’, which are intended originally for social welfare, as tools to justify the move to more guaranteed-in-substance type of deposits, and hence, more risk shifting rather than risk sharing in the Mudaraba contract. This use, is argued, moves Islamic banking towards more market-oriented, but less Shariaa-compliant in substance. Research limitations/implications – This papers examined the behaviour of Islamic financial institutions and Islamic scholars based on the available literature. No empirical analysis was conducted. Originality/value – This paper contributes to the ongoing debate about the substance of Islamic banking transactions and the risk shifting inherent in such transactions. Furthermore, it is the first study that examines the extent of utilizing different social welfare concepts to legalize – from Shariaa perspective – Islamic banking transactions.

Regulatory capital funds and risk-sharing behavior in distressed financial conditions

2018 ◽  
Vol 16 (1) ◽  
pp. 197-216
Author(s):  
Mohd Yaziz Mohd Isa ◽  
Md. Zabid Hj Abdul Rashid
Keyword(s):  
Risk Sharing ◽  
Capital Requirements ◽  
Risk Shifting ◽  
Islamic Banks ◽  
Regulatory Capital ◽  
Content Type ◽  
Targeted Interventions ◽  
Financial Conditions ◽  
Sharing Behavior ◽  
Practical Implications

Purpose This paper aims to investigate the adequacy of regulatory capital funds through loss provisioning policies because of worsening credit quality associated with distressed financial conditions. A financial distress occurs when banks have difficulty in honoring financial commitments. This paper is expected to unveil how the provisioning mechanisms can address concerns associated with pro cyclicality of regulatory capital funds requirements, and how the banks behave in distressed financial conditions to share risks. The pro cyclicality of regulatory capital funds is the effect of various components of the financial system that aggravates the economic cycle such as during the expansion of the economy when banks are able to provide more loans and meet regulatory capital requirements with ease, while during the contraction of the economic cycle, can lead to deterioration of asset quality, and the resultant need to make loss provisions and recognize impairment. In turn, the situation puts further pressures on the capital requirements held by banks and their risk-sharing behavior. The paper analyzes a sample of Islamic banks in Malaysia. Design/methodology/approach By estimating credit risk-related information through loss provisioning policies, the paper uses an unbalanced panel data on all Islamic banks in the Association of Islamic Banking Institutions Malaysia from 2003 to 2014. The association consists of full-fledged Islamic banks and several foreign-owned entities. Findings The paper findings support that Islamic banks during observed period of distressed financial conditions were less discouraged to increase their regulatory capital funds to share risks. Intuitively, they were more encouraged to engage in risk-shifting behavior. Also, the risk-shifting behavior was found to have a significantly high potential in foreign-owned Islamic banks than in domestic Islamic banks. Research limitations/implications Although the study is based on a sample of Islamic banks in Malaysia, the findings suggest targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing. Practical implications The outcome of this paper has practical implications for Islamic banks to build a buffer of capital funds to face downward pressures during heightened financial uncertainties while serving as protection to depositors. Moreover, this study has practical implications for shareholders to avail themselves the benefits of high investment accounts financing. The Islamic banks can continue to play their role in promoting inclusive growth, reducing inequality and accelerating poverty reduction. Social implications Although the current study is based on a sample of Islamic banks in Malaysia, the finding suggests that the extent of risk shifting was significantly more incentivized among the foreign-owned rather than the domestic Islamic banks. This information can be used to develop targeted interventions aimed at discouraging risk shifting or transfer of risks in an interest-free Islamic financing. Originality/value This paper is the first that investigates on adequacy of regulatory capital funds of Islamic banks through loss provisioning policies.

Layers of misconceptions about Islamic banking

2019 ◽  
Vol 10 (3) ◽  
pp. 874-892 ◽  
Author(s):  
Malik Shahzad Shabbir ◽  
Awais Rehman
Keyword(s):  
Data Analysis ◽  
Financial Institutions ◽  
Design Methodology ◽  
Banking System ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Significant Difference ◽  
Challenges And Opportunities ◽  
Islamic Financial Institutions

Purpose This paper aims to identify some important misconceptions about Islamic banks, which impact investor’s portfolio in term of threats, challenges and opportunities. This paper is trying to attempt to present five different layers of misconceptions regarding investor portfolio. Design/methodology/approach This paper distributed 132 questionnaires among investors of Islamic financial institutions and multiple regression of least significant difference (LSD) method implied for data analysis. Findings The results of this paper show that two variables, such as opportunity and challenge, out of three are positively significant and the remaining one variable, threat, is insignificant regarding investor portfolio. Originality/value This paper is the first ever attempt in its nature to identify the different misconceptions about Islamic banking system and its impact on investor portfolio.

Exploring the dynamic contribution behavior of editors in wikis based on time series analysis

2016 ◽  
Vol 50 (1) ◽  
pp. 41-57 ◽  
Author(s):  
Linghe Huang ◽  
Qinghua Zhu ◽  
Jia Tina Du ◽  
Baozhen Lee
Keyword(s):  
Time Series ◽  
Time Series Analysis ◽  
Time Series Data ◽  
Time Of Day ◽  
Observation Time ◽  
Series Data ◽  
Clustering Methods ◽  
Content Type ◽  
Free Rider Problem ◽  
Series Analysis

Purpose – Wiki is a new form of information production and organization, which has become one of the most important knowledge resources. In recent years, with the increase of users in wikis, “free rider problem” has been serious. In order to motivate editors to contribute more to a wiki system, it is important to fully understand their contribution behavior. The purpose of this paper is to explore the law of dynamic contribution behavior of editors in wikis. Design/methodology/approach – After developing a dynamic model of contribution behavior, the authors employed both the metrological and clustering methods to process the time series data. The experimental data were collected from Baidu Baike, a renowned Chinese wiki system similar to Wikipedia. Findings – There are four categories of editors: “testers,” “dropouts,” “delayers” and “stickers.” Testers, who contribute the least content and stop contributing rapidly after editing a few articles. After editing a large amount of content, dropouts stop contributing completely. Delayers are the editors who do not stop contributing during the observation time, but they may stop contributing in the near future. Stickers, who keep contributing and edit the most content, are the core editors. In addition, there are significant time-of-day and holiday effects on the number of editors’ contributions. Originality/value – By using the method of time series analysis, some new characteristics of editors and editor types were found. Compared with the former studies, this research also had a larger sample. Therefore, the results are more scientific and representative and can help managers to better optimize the wiki systems and formulate incentive strategies for editors.

Dynamic prediction of Indian stock market: an artificial neural network approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Himanshu Goel ◽  
Narinder Pal Singh
Keyword(s):  
Neural Network ◽  
Artificial Neural Network ◽  
Stock Market ◽  
Institutional Investors ◽  
Time Series Data ◽  
Gradient Algorithm ◽  
Series Data ◽  
Content Type ◽  
Artificial Neural ◽  
Indian Stock Market

Purpose Artificial neural network (ANN) is a powerful technique to forecast the time series data such as the stock market. Therefore, this study aims to predict the Indian stock market closing price using ANNs. Design/methodology/approach The input variables identified from the literature are some macroeconomic variables and a global stock market factor. The study uses an ANN with Scaled Conjugate Gradient Algorithm (SCG) to forecast the Bombay Stock Exchange (BSE) Sensex. Findings The empirical findings reveal that the ANN model is able to achieve 93% accuracy in predicting the BSE Sensex closing prices. Moreover, the results indicate that the Morgan Stanley Capital International world index is the most important variable and the index of industrial production is the least important in predicting Sensex. Research limitations/implications The findings of the study have implications for the investors of all categories such as foreign institutional investors, domestic institutional investors and investment houses. Originality/value The novelty of this study lies in the fact that there are hardly any studies that use ANN to forecast the Indian stock market using macroeconomic indicators.

Has the low level of economic growth spurred informal sector activities in Uganda? An empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stephen Esaku
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Shadow Economy ◽  
Time Series Data ◽  
Series Data ◽  
Content Type ◽  
Low Level ◽  
Revenue Collection ◽  
Long Run ◽  
Short Run

PurposeIn this paper, the authors examine how economic growth shapes the shadow economy in the long and short run.Design/methodology/approachUsing annual time series data from Uganda, drawn from various data sources, covering the period from 1991 to 2017, the authors apply the ARDL modeling approach to cointegration.FindingsThis paper finds that an increase in economic growth significantly reduces the size of the shadow economy, in both the long and short run, all else equal. However, the long-run relationship between the shadow economy and growth is non-linear. The results suggest that the rise of the shadow economy could partially be attributed to the slow and sluggish rate of economic growth.Practical implicationsThese findings imply that addressing informality requires addressing underlying factors of underdevelopment since improvements in economic growth also translate into a reduction in the size of the shadow economy in the short and long run.Originality/valueThese findings reveal that the low level of economic growth is an issue because it spurs informal sector activities in the short run. However, as the economy improves, it becomes an incentive for individuals to operate in the informal sector. Additionally, tackling shadow activities in the short run could help improve tax revenue collection.

Identifying the gaps between customer expectations and perceptions on service quality dimensions of Islamic banks in Malaysia

2015 ◽  
Vol 7 (4) ◽  
pp. 424-441 ◽  
Author(s):  
Rafikul Islam ◽  
Selim Ahmed ◽  
Dzuljastri Abdul Razak
Keyword(s):  
Service Quality ◽  
Age Groups ◽  
Educational Background ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Customer Expectations ◽  
Banking Service ◽  
Significant Difference

Purpose – This paper aims to identify the gaps and differences between customer expectations and perceptions on service quality of Islamic banks in Malaysia based on six dimensions of service quality, namely, reliability, responsiveness, assurance, empathy, tangibles and Islamic Shari’ah compliance. Design/methodology/approach – This study surveyed 179 customers who have first-hand experience with Islamic banking services in Malaysia. The research data were analysed using reliability analysis, independent samples t-test and one-way analysis of variance. Findings – The results indicated that customers’ perceptions failed to meet their expectations on the service quality of Islamic banks in Malaysia. The results also indicated that those customers (respondents) aged below 30 years have higher expectations on empathy from the Islamic banking service compared to other age groups. However, there is no significant difference between customer expectations and perceptions of Islamic banking service quality based on educational background and occupation. Research limitations/implications – This research focused solely on Islamic banks in Malaysia and thus the results might not be applicable for other conventional banks. Originality/value – The findings are expected to provide guidelines for enhancing the satisfaction level of clients of the Islamic banking system in Malaysia and other countries.

scholarly journals Moderate-Intensity Physical Exercise Affects the Exercise Performance and Gut Microbiota of Mice

2021 ◽  
Vol 11 ◽  
Author(s):  
Wenqian Yang ◽  
Yuqian Liu ◽  
Guang Yang ◽  
Binglin Meng ◽  
Zhicheng Yi ◽  
...  
Keyword(s):  
Gut Microbiota ◽  
Exercise Performance ◽  
Exercise Intervention ◽  
Time Series Data ◽  
Shannon Index ◽  
Series Data ◽  
Moderate Intensity ◽  
Rrna Gene ◽  
Exercise Tests ◽  
Significant Difference

The gut microbiota is closely associated with the health of the host and is affected by many factors, including exercise. In this study, we compared the gut microbial changes and exercise performance over a 14-week period in mice that performed exercise (NE; n = 15) and mice that did not perform exercise (NC; n = 15). Mice were subjected to stool collection and exercise tests one week prior to adaptive training and after 2, 6, 10, and 14 weeks of exercise. Bacteria associated with the stool samples were assessed via Illumina-based 16S rRNA gene sequencing. While there was no significant difference in body weight between the groups (p > 0.05), the NE group had a significantly higher exercise performance from weeks 2–14 (p < 0.01) and lower fat coefficient (p < 0.01) compared with the NC group. The Shannon index of the gut microbiota in the NC group was higher than that in the NE group at weeks 6 and 10, and the Chao1 index was higher than that in the NE group at week 14. Exercise performance positively correlated with the relative abundance of Phascolarctobacterium. Grouped time series data analysis demonstrated that Bifidobacteria, Coprococcus, and one unnamed genus in the Clostridiales order were significantly increased in the NE group, which correlated with increased glucose, flavonoid, arginine, and proline metabolism. In conclusion, moderate-intensity treadmill exercise significantly increased the exercise performance of mice and changed the core bacteria and bacterial metabolic activity. These results provide a reference for studying the effects of exercise intervention and exercise performance on the gut microbiota of mice.

scholarly journals Risk Analyses on Islamic Banks in Indonesia

2020 ◽  
Author(s):  
Dimas Bagus Wiranatakusuma ◽  
Imamuddin Yuliadi ◽  
Ikhwan Victhori
Keyword(s):  
Time Series ◽  
Financial Services ◽  
Time Series Data ◽  
Liquidity Risk ◽  
Series Data ◽  
Islamic Banks ◽  
Monthly Basis ◽  
Income Ratio ◽  
Financing Risk ◽  
Risk Vulnerability

This study aims to analyze the risks on Islamic banks in Indonesia by identifying which risk is significantly dominant in triggering other risks to happen. For that purpose, the study uses time series data on a monthly basis from 2010:M1 to 2018:M8. The data are obtained from the Financial Services Authority (OJK) Indonesia and analyzed using vector autoregression (VAR). Some variables are employed to proxy risk vulnerability including financing-to-deposit ratio (FDR) as a proxy of liquidity risk, nonperforming financing (NPF) as a proxy of financing risk, and cost-to-income ratio (BOPO) as a proxy of operational risk. The findings suggest that financing risk is the most dominant risk triggering vulnerability on Islamic banks in Indonesia.

An improved morphological weighted dynamic similarity measurement algorithm for time series data

2018 ◽  
Vol 11 (4) ◽  
pp. 486-495
Author(s):  
Ke Yi Zhou ◽  
Shaolin Hu
Keyword(s):  
Time Series ◽  
Time Series Data ◽  
Morphological Changes ◽  
Series Data ◽  
Similarity Measurement ◽  
Improved Method ◽  
Control Measurement ◽  
Content Type ◽  
Basic Work ◽  
Measurement Algorithm

Purpose The similarity measurement of time series is an important research in time series detection, which is a basic work of time series clustering, anomaly discovery, prediction and many other data mining problems. The purpose of this paper is to design a new similarity measurement algorithm to improve the performance of the original similarity measurement algorithm. The subsequence morphological information is taken into account by the proposed algorithm, and time series is represented by a pattern, so the similarity measurement algorithm is more accurate. Design/methodology/approach Following some previous researches on similarity measurement, an improved method is presented. This new method combines morphological representation and dynamic time warping (DTW) technique to measure the similarities of time series. After the segmentation of time series data into segments, three parameter values of median, point number and slope are introduced into the improved distance measurement formula. The effectiveness of the morphological weighted DTW algorithm (MW-DTW) is demonstrated by the example of momentum wheel data of an aircraft attitude control system. Findings The improved method is insensitive to the distortion and expansion of time axis and can be used to detect the morphological changes of time series data. Simulation results confirm that this method proposed in this paper has a high accuracy of similarity measurement. Practical implications This improved method has been used to solve the problem of similarity measurement in time series, which is widely emerged in different fields of science and engineering, such as the field of control, measurement, monitoring, process signal processing and economic analysis. Originality/value In the similarity measurement of time series, the distance between sequences is often used as the only detection index. The results of similarity measurement should not be affected by the longitudinal or transverse stretching and translation changes of the sequence, so it is necessary to incorporate the morphological changes of the sequence into similarity measurement. The MW-DTW is more suitable for the actual situation. At the same time, the MW-DTW algorithm reduces the computational complexity by transforming the computational object to subsequences.

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