Are Islamic banks intellectually efficient Empirical evidence from Bangladesh

Purpose – This paper aims to draw on the bank rent approach to evaluate the existing pattern of financing of Islamic banks and to propose a fairly new conceptualization of Islamic bank rent. Design/methodology/approach – The bank rent theory is adopted to generate the theoretical underpinnings of the issue. After that, empirical evidence from the banking sector of Bangladesh is used to support the arguments. Findings – Repeated transactions under murabaha are observed in the Islamic banking sector of Bangladesh. The asset-based financing gives the Bangladeshi Islamic banks relatively higher Islamic bank rent opportunity for protecting their “franchise value” as Shari’ah-compliant lenders, while responding to the periodic volatility in transaction costs of profit-and-loss sharing. Research limitations/implications – The bank rent approach suggests that the murabaha syndrome can be ironically justifiable. On the other hand, the current profit-and-loss sharing risk provides an idea of the difficulty in assuming the participatory financing with higher credit risk in practice. Islamic scholars and the regulatory authority need to design an appropriate financial architecture which can create different levels of rent opportunities for Islamic banks to avail the benefit from the variety of Islamic financing as declared by Islamic Shari’ah. Originality/value – This paper introduces a fairly new concept of “Islamic bank rent” to make sense of the murabaha syndrome. This approach also contributes to clarifying the unique risk and cost to be compensated with the spreads that Islamic banks are expected to earn. To draw empirical evidence, as far as it could be ascertained, the data of both Islamic banks and conventional banks with Islamic banking windows/branches are used for the first time.

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Assessing the Revenue Efficiency of Domestic and Foreign Islamic Banks: Empirical Evidence from Malaysia

Jurnal Pengurusan ◽

10.17576/pengurusan-2013-37-08 ◽

2013 ◽

Vol 37 ◽

pp. 77-90 ◽

Cited By ~ 5

Keyword(s):

Empirical Evidence ◽

Islamic Banks ◽

Revenue Efficiency

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Assessing the Risk Management Practices of Islamic Banks : Empirical Evidence from Malaysia and Pakistan

Journal of Islamic Economics Banking and Finance ◽

10.12816/0031373 ◽

2013 ◽

Vol 9 (4) ◽

pp. 11-29 ◽

Cited By ~ 1

Author(s):

Rashidah Abdul Rahman ◽

Siti Balqis ◽

Faisal Dean

Keyword(s):

Risk Management ◽

Empirical Evidence ◽

Management Practices ◽

Islamic Banks

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Ownership structure and financial performance in Islamic banks

International Journal of Islamic and Middle Eastern Finance and Management ◽

10.1108/imefm-01-2013-0002 ◽

2014 ◽

Vol 7 (2) ◽

pp. 146-160 ◽

Cited By ~ 22

Author(s):

Sarra Ben Slama Zouari ◽

Neila Boulila Taktak

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Empirical Evidence ◽

Ownership Structure ◽

Policy Implications ◽

Bank Performance ◽

Islamic Banks ◽

Content Type ◽

Islamic Bank ◽

The Impact

Purpose – This study aims to investigate empirically the relationship between ownership structure (concentration and mix) and Islamic bank performance, with a special attention to the identity of the block investor (foreign, family, institutional and state). Design/methodology/approach – Regression analyses are conducted to test the impact of the identity of the first shareholders and the degree of concentration on Islamic bank performance, using a panel data sample of 53 Islamic banks scattered over > 15 countries from 2005 to 2009. Findings – Results suggest that ownership is concentrated at 49 per cent, and for 41 banks from the full sample, the ultimate owner is institutional. State investors come in second place, followed by family ultimate shareholders. Using return on assets and return on equity as performance measures, empirical evidence highlights the absence of correlation between ownership concentration and Islamic bank performance. It also reveals that the combined effort of family and state investors is beneficial to bank performance. Results also indicate that banks with institutional and foreign shareholders do not perform better. Empirical findings suggest that the financial crisis impacts negatively Islamic bank performance. Research limitations/implications – The use of dummy variables to measure the nature of the largest owner represents the main limitation of this study. This is due to the lack of information, as the percentage of the largest capital held referring to owner category was available only for some banks. Practical implications – This research has given a brighter insight into corporate governance and bank performance in selected Islamic banking institutions. Findings provided useful information to bank managers, investors and policy makers. Financial performance can be improved by identifying practices associated with ownership structure. So, it will have policy implications for Islamic banks as to how to improve their performance. Finally, different types of bank ownership have had different concerns about implementing corporate governance practices among Islamic banks. Originality/value – This work is the first of its kind for Islamic banks. It extends previous research by examining whether ownership structure (concentration and mix) affects performance. It also fills the gap in the literature by providing empirical evidence on a large sample involving data from 15 countries. Finally, manual data collection on ownership structure constitutes a large part of the research for this paper.

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