Islamic banks and conventional banks within the recent global financial crisis: empirical evidence from the GCC region

2014 ◽  
Vol 7 (3/4) ◽  
pp. 196 ◽  
Author(s):  
Mohamed Chakib Kolsi ◽  
Fatma Zehri
Keyword(s):  
Financial Crisis ◽  
Empirical Evidence ◽  
Global Financial Crisis ◽  
Islamic Banks ◽  
Conventional Banks

scholarly journals Effects of the Global Financial Crisis on the Agency Cost of Islamic Banks and Conventional Banks

2017 ◽  
Vol 4 (1) ◽  
pp. 44
Author(s):  
Talla M Aldeehani
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Gulf Cooperation Council ◽  
Agency Cost ◽  
Islamic Banks ◽  
Empirical Testing ◽  
Before And After ◽  
The Status ◽  
Conventional Banks ◽  
The Global Financial Crisis

In this paper, we investigate the effect of the 2008 global financial crisis on the agency cost (AC) of Islamic banks (IBs) and conventional banks (CBs). Many pioneering scholars (see, for example, Archer et al., 1998) have recognized fundamental differences in the capital structures and risks of IBs compared to CBs and called for more empirical testing of these issues. This effort is in response to those calls. Focusing on AC, we collected data for all Gulf Cooperation Council (GCC) banks satisfying the period from 2001-2014. The data was split into “before” and “after” the 2008 crisis. Although statistically insignificant, the analysis shows higher AC for IB compared to CBs before and after the crisis. However, we provide evidence of significant differences in AC causal models for the two types of banks. For conventional banks, only profitability factors explain variability in AC before and after the crisis. For Islamic banks, however, in addition to profitability, liquidity, deposits and financing facilities matter depending on the status of the economy. We provide further discussions, implications, and recommendations.

scholarly journals Financial System Stability in Indonesia during The Global Financial Crisis 2007/2008: Conventional vis-à-vis Islamic

2015 ◽  
Vol 2 (2) ◽  
pp. 136
Author(s):  
Muh. Rudi Nugroho ◽  
Ibnu Qizam
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Internal Variable ◽  
Islamic Banks ◽  
Z Score ◽  
Internal Factors ◽  
Macroeconomic Factors ◽  
Conventional Banks ◽  
The Global Financial Crisis

This research aims to analyze the financial stability especially in dual banking system in Indonesia and discusses the role of Islamic banks in the financial stability of national banks. In addition, this study also focuses on the analysis of the determinants of financial stability namely on the national banking Industry. This research uses panel data in which combined data between time series and cross section with an observation periods are 2005:1 - 2009:1 by using an internal variable of banks and macroeconomic data. Z-score analysis will be used as main tool analysis regressed with internal variable. Empirical results obtained from this research shows that during the period of 2005:1 - 2009:1 banking financial stability, for both conventional and Islamic and categorized based on an asset scale, the movement of the Z-score value is different. From the Z-score values analysis shows that Islamic banks are the most stable bank with a trend increased sharply when compared with other banks, namely conventional couterparts. If viewed from each category, small conventional banks more stable than small Islamic banks, and there are declining trend in 2005:1 to 2009:1. Whereas for large and middle conventional banks the trend of the Z-score movement are in the same patterns. This study also founds that the determinant of the banking stability can be seen from two sides namely bank's internal factors and macroeconomic factors. Internal factors consist of: Income Diversity (ID), Credit or Financing (Loan), Total Assets (TA), Operational Cost (Cost), Cost Income (CI), Loan Asset (LA), Current Liability (CL), Cash to Current Liabilities (CCL), Capital Bank (MDL). While macroeconomic factors consist of: inflation, BI Rate, Exchange Rate, Composite Index (JCI), the Gross Domestic Product (GDP). This research also examined the extent to which the role of Islamic banks and the global financial crisis to the financial stability of national banking. This analysis shows that the global financial crisis and Islamic banks affect significantly to the financial stability of banking industries in Indonesia.

Productivity of Islamic and Conventional Banks in Malaysia –During the Pre and Post Global Financial Crisis

2019 ◽  
Vol 16 (2) ◽  
pp. 86-95
Author(s):  
Muhamad Azhari Wahid ◽  
Mohd Shukor Harun
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
Malmquist Productivity Index ◽  
Productivity Index ◽  
Productivity Change ◽  
Islamic Banks ◽  
Productivity Level ◽  
Negative Effect ◽  
Conventional Banks

The global financial crisis has evidenced sluggish progress in the growth of Malaysian banking sector’s assets, deposits, and loans. The scenario could have affMalmquist Productivity Indexected the productivity of Malaysian banks which consists of Islamic and conventional banks. This study aims to evaluate and distinguish the productivity change of 17 Malaysian Islamic banks and 21 conventional banks during the pre and post global financial crisis. To estimate total productivity change of both type of banks, this study employs the Malmquist Productivity Index (MPI) method. In calculating the MPI, the study considers total deposits, personnel expenses and fixed assets as the inputs while for the outputs, the study considers loans, investment and non-interest income. The empirical results reveal that the Islamic and conventional banks have been productive throughout the period of observation. However, the results pointed out that Islamic banks have been more productive than its conventional counterparts. Interestingly, the study indicates that both Islamic and conventional banks have failed to operate at an optimal scale of operations. This could have negative effect on the productivity level of these banks. Furthermore, the recent global financial crisis has negative impact on the productivity level of Islamic and conventional banks in Malaysia.

How crisis-proof is Islamic finance?

2018 ◽  
Vol 10 (4) ◽  
pp. 415-426 ◽  
Author(s):  
Hasnan Baber
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Global Financial Crisis ◽  
Islamic Finance ◽  
Islamic Banks ◽  
Actual Performance ◽  
Content Type ◽  
Current Financial Crisis ◽  
Conventional Banks ◽  
The Global Financial Crisis

PurposeThis paper aims to explore Islamic finance’s resilience in times of financial crisis and considers Islamic finance’s viability as an alternative to the current financial system.Design/methodology/approachEstablished on a review of theoretical aspects underlying the notion of Islamic finance being proficient of reducing the harshness of financial crises and a latent solution to financial volatility, this paper assesses actual performance of Islamic and conventional banks during and in the repercussion of the current financial crisis. Interviews were also conducted with managers of Islamic banks.FindingsThe paper concludes that performance of Islamic banks during the global financial crisis is found to be supportive of their argued resilience and consistency. However, the latest financial crisis has brought to light a number of theoretical and realistic issues that challenge Islamic finance and its absorbing capacity against financial crises.Originality/valueThe paper is an original work which suggests about moderating risks and proposing various ways in which the Islamic finance can be made more stable and resilient.

Comparing the competition of Malaysia Islamic and conventional banks

2017 ◽  
Vol 8 (1) ◽  
pp. 23-40 ◽  
Author(s):  
Muhamad Azhari Wahid
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Robust Regression ◽  
Global Financial Crisis ◽  
Positive Impact ◽  
Ordinary Least Squares ◽  
Islamic Banks ◽  
Content Type ◽  
Conventional Banks ◽  
The Impact

Purpose This study aims to analyse three main questions within the Malaysian banking system: Are Islamic banks more competitive than conventional banks? What are the levels of competition for Islamic and conventional banking sectors pre, during and post the 2007-2009 global financial crisis? Does penetration of Islamic banks affect the competitive structure of conventional banks? Design/methodology/approach In measuring a bank competition, the author estimates the Panzar–Rosse H-statistic (PRH) method on 17 Islamic and 21 conventional banks in Malaysia over the period of 2004-2013. This is then followed by ordinary least squares (OLS) robust regression analysis to control Islamic banks’ penetration, bank-specific and macroeconomic factors. Findings Results from the PRH method (total revenue) suggest that Malaysian Islamic banks are relatively more competitive than their conventional counterparts. Furthermore, the author observes that the level of competition for both Malaysian Islamic and conventional banks increased tremendously during the 2007-2009 global financial crisis. This suggests the impact of the crisis on the level of competition for both banking systems. Finally, the OLS robust regression suggests that Islamic banks’ penetration has a significantly positive impact on the level of competition for conventional banks. The PRH estimation using total interest income indicates similar results, suggesting the robustness of these results. Practical implications This study reveals whether Islamic banks’ penetration is able to increase the level of competition within the conventional banking sector. Knowledge on this is important to the policymaker. Originality/value To the best of the author’s knowledge, this is the first study using the PRH method in comparing the level of competition for Malaysian Islamic and conventional banks. Furthermore, this is the first study analysing the impact of Malaysian Islamic banks’ penetration on the level of competition for conventional banks.

scholarly journals COMPARATIVE ANALYSIS OF BANK STABILITY IN INDONESIA: A NON-PARAMETRIC APPROACH ON DIFFERENT BANKING MODELS

2018 ◽  
Vol 3 (2) ◽  
Author(s):  
Norzitah Abdul Karim ◽  
Syed Musa Syed Jaafar Alhabshi ◽  
Salina Kassim ◽  
Razali Haron
Keyword(s):  
Financial Crisis ◽  
Financial Intermediation ◽  
Global Financial Crisis ◽  
Islamic Banks ◽  
Sample Period ◽  
Bank Stability ◽  
Conventional Banks ◽  
The Global Financial Crisis ◽  
The Impact ◽  
Non Parametric

The present study, grounded in theory of financial intermediation, provides new empirical evidence on comparison of bank stability measures of Islamic banks, conventional banks and other bank models in Indonesia. Specifically, 72 conventional banks, 4 Islamic banks, 3 conventional banks with Islamic subsidiaries and 2 subsidiary Islamic banks in Indonesia are considered, focusing on the sample period of 1999-2015. The study adopts z-score as a measure of bank stability, while a non-parametric multiple comparison analysis was used to test the significance of the differences in the bank stability of the different bank models, namely Islamic banks, conventional banks, Subsidiary Islamic banks and conventional banks with Islamic subsidiaries. The sample period is further divided into three sub-periods, namely, before the global financial crisis (1999-2006), during the global financial crisis (2007-2009) and after the global financial crisis (2010-2015) so as to gain more detail findings on the impact of the global financial crisis on the banks’ stability. The impact of local crisis periods (1999-2001) on bank stability of different bank models is also investigated. Findings of this study contribute towards extending the theory of financial intermediation through empirical works of stability of different banking models namely Islamic banks, conventional banks, Subsidiary banks and conventional banks with Islamic subsidiaries.

scholarly journals Credit Rating Strategies: A Study of GCC Banks

SAGE Open ◽  
2020 ◽  
Vol 10 (4) ◽  
pp. 215824402098229
Author(s):  
Y. Sree Rama Murthy ◽  
Saeed Al-Muharrami
Keyword(s):  
Financial Crisis ◽  
Credit Rating ◽  
Global Financial Crisis ◽  
Focal Point ◽  
Credit Ratings ◽  
Islamic Banks ◽  
Before And After ◽  
Capital Ratios ◽  
Financial Strategies ◽  
Conventional Banks

Identifying financial strategies, which help a bank to survive a crisis, is the main purpose of the article. Low oil prices and the COVID-19 pandemic is the latest crisis being faced by the Gulf Cooperation Council (GCC) banks. This article examines the financial strategies of those banks that managed to retain good credit ratings both before and after the global financial crisis, so as to throw light on the characteristics of banks that managed to remain steady and stable. This article analyzes the Fitch credit ratings of 51 Islamic and conventional banks, operating in the GCC, divided into pre–global financial crisis (2002–2007) and post–global financial crisis (2008–2013) periods. Trend and behavior of average ratios of top-rated banks in both the periods is first attempted before moving to the “Ordered Choice Logit” regression method to further analyze the data. Regression results indicate that size and cost management are very important factors in ratings both before and after the financial crisis. As long as asset quality is under control, liquidity is the focal point in achieving good ratings. Top-rated Islamic banks seem to be following a strategy of allowing capital ratios to trend down during a crisis as long as capital is well above the regulatory requirements. The article is the first of its kind, which examines credit rating strategies of GCC Islamic banks and conventional banks. The findings of the article are useful for banks as they throw light on appropriate strategies to be adopted by banks during crises.

Islamic and Conventional Banks Stability during Global Financial Crisis: Evidence from Indonesia

2021 ◽  
Vol 12 (3) ◽  
pp. 2833-2840
Author(s):  
NunungAiniRahmah Et.al
Keyword(s):  
Regression Analysis ◽  
Financial Crisis ◽  
Sample Size ◽  
Global Financial Crisis ◽  
Market Concentration ◽  
Islamic Banks ◽  
Islamic Bank ◽  
Z Scores ◽  
Conventional Banks ◽  
The Stability

This study observes the stability of Islamic and conventional banks in Indonesia mainly during and post global financial crisisand their impact to the general financial stability.Bank stability measured by Z-scores, could be influenced by bank specifics, market concentration, and macroeconomic indicators.Pooled GLS regression analysis wereemployed to examine the Islamic and conventional banks stability. The sample size is 50 banks in Indonesia, consisting of 9 Islamic banks and 41 conventional banks between 2008 and 2017. The finding showed that the stability of the conventional bankslower than the Islamic bank. However,large Islamic banks are significantly less stable than the large conventional banks. Meanwhile, the small Islamic banks are significantly more stable than the small conventional banks. The finding of the study is expected to enhance the understanding of banks stability during and post global financial crisis in general, and within the context of Indonesia in particular.

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