Hussein, Kassim (2010): Bank level stability factors and consumer confidence – a comparative study of Islamic and conventional banks’ product mix.
Download (317kB) | Preview
This study examines the behaviour of key bank level stability factors of liquidity, capital, risk-taking and consumer confidence in Islamic and conventional banks which operate in the same market. Using fixed effect sample of 194 banks of Gulf Cooperating Countries between 2000 and 2007, we found that liquidity is not determined by bank’s product mix but rather attributed to systematic factors. However, non performing assets (representing loans to sub prime borrowers) have positive and significant relationship with liquidity implying that during the crisis, Islamic banks tend to take stringent risk strategies compared to conventional banks. Furthermore, Islamic banks generally tend to provide higher consumer confidence levels as they were more capitalized than conventional banks, although conventional banks had carried higher averages of liquidity compared to Islamic banks. Consumer confidence levels or depositors’ discipline as proxied by deposits and customer funding over liabilities generally appear to be higher in Islamic banks than conventional banks.
|Item Type:||MPRA Paper|
|Original Title:||Bank level stability factors and consumer confidence – a comparative study of Islamic and conventional banks’ product mix|
|Keywords:||Bank stability, consumer confidence, depositors’ discipline, Islamic banks, Gulf Cooperating Countries|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Kassim Hussein|
|Date Deposited:||25 May 2010 01:01|
|Last Modified:||21 Jan 2016 15:26|
Almeida, H, Campello, M and Weisbach, M S (2004). The cash flow sensitivity of cash New York University American Congress (2009), Report of the Congressional Oversight Panel on Regulatory reform. US Congress.
Ariff, M., (1998), Islamic Banking. Asian-Pacific Economic Literature,. 2(2). 46–62.
Aziz, Z. A, (2009) : Islamic finance and financial stability. Opening remarks by Governor of the Central Bank of Malaysia, at the BNM High Level Conference on Financial Stability, Bank Negara Malaysia, Kuala Lumpur, 24 November 2009. http://www.bis.org/review/r091130d.pdf
Bashir, A., H. M., (1999), Risk and profitability measures in Islamic banks: The case of two Sudanese banks. Islamic Economic Studies, 6, 1–24.
Blum, J., (1999), “Do Capital Adequacy Requirements Reduce Risks in Banking?,” Journal of Banking and Finance, 23, 755-71.
Borio, C., (2008) The financial turmoil of 2007–?: a preliminary assessment and some policy considerations. BIS Working Paper No 251
Čihák, M., (2006), How do Central Banks write on financial stability?” IMF Working Paper No. 06/163 (Washington: International Monetary Fund).
Čihák, M., and Hesse, H., (2008), “Islamic banks and financial stability: An Empirical Analysis,” IMF Working Paper 08/16 (Washington: International Monetary Fund).
Cornford, A., ( 2004), “The Basel Committee’s Standard for Revised Capital Standards: Rationale, Design and Possible Incidence.
Danmarks Nationalbank, (2004). Market-based risk measures for banks in Financial Stability 2004 (Copenhagen: Danmarks National Bank).
Dusuki, A.W (2008) Understanding the Objectives of Islamic Banking: A Survey of Stakeholders' Perspectives. International Journal of Islamic and Middle Eastern Finance and Management, 1(2) 132 – 148
Ediz, T., Michael, I. M., and Perraudin, W R M, (1998), “Bank Capital Dynamics and Regulatory Policy, “Bank of England mimeo.
El Qorchi, M., (2005), “Islamic Finance Gears Up,” Finance and Development (Washington: International Monetary Fund).
El-Hawary, D., Grais, W., Iqbal, Z., (2004). Regulating Islamic financial institutions: the nature of the regulated. World Bank Working Paper 3227 Washington: World Bank.
El-Hawary, D., Grais, W., and Zamir, I., (2004), Regulating Islamic Financial Institutions: The Nature of the Regulated,” World Bank Policy Research Working Paper No. 3227 (25 February), Washington, D.C.
Elosegui, P., and Pinteris, G., (2002), “Privatization, Foreign Entry, and Bank Risk in Emerging Banking System: Evidence from Argentina,” working paper presented at the University of Illinois and Mid-west Finance Association.
Errico, L., and Farrahbaksh, M., (1998), “Islamic Banking: Issues in Prudential Regulation and Supervision,” IMF Working Paper 98/30 (Washington: International Monetary Fund).
Ferri, G. and . Kang, T.S (1999), “The Credit Channel at Work: Lessons from the Financial Crisis in Korea,” Economic Notes, 28, No. 2, pp. 195-221.
Financial Times, 2008, Islamic Finance, “Special Report,” 19 June 2008
Furlong, Frederick. T. and Keely, M.C., (1989), “Capital regulation and bank risk-taking: A note”, Journal of Banking and Finance, 13, pp. 883-891
Gennote, G. and Pyle, D., (1991), “Capital Controls and Bank Risk,” Journal of Banking and Finance,. 15, 805-41.
Hamilton, L.C., (2002), Statistics with Stata (Belmon, CA: Duxbury).
Hart, O.D. and D.M. Jaffe, (1974), “On the application of portfolio theory to depository financial intermediaries,” Review of Economic Studies, 41, 129-147.
Haque, A.; Osman, O., Ismail, A., (2009) Factor influences selection of Islamic banking: a study on Malaysian customer preferences American Journal of Applied Sciences
Hassan, M. Kabir (ed.), (2003), Textbook on Islamic Banking (Dhaka, Bangladesh: Islamic Economic Research Bureau).
Hesse, H., and Čihák, M., (2007), “Cooperative Banks and Financial Stability,” IMF Working Paper No. 07/02 (Washington: International Monetary Fund).
Hesse, Heiko, Andreas A. Jobst, Juan Solé, (2008), “Trends and Challenges in Islamic Finance," World Economics, 9(2), 175-193
Iqbal, M., Molyneux, P. (2005). Thirty Years of Islamic Banking, Macmillan, Palgrave
Iqbal, M., and Llewellyn, D.T.,(eds.), (2002), “Islamic Banking and Finance: New Perspective on Profit-Sharing and Risk,” (Cheltenham, United Kingdom: Edward Elgar Publishing).
Iqbal, Z., and Mirakhor, A., (l987), “Islamic Banking,” International Monetary Fund
Ito, T., and. Sasaki, Y.N (1998), “Impacts of the Basel Capital Standard on Japanese Banks’ Behavior,” NBER working paper No. 6730. September.
Jacques, K.T. , and Nigro, P. (1997), “Risk-Based Capital, Portfolio Risk, and Bank Capital: A Simultaneous Equations Approach,” Journal of Economic and Business, 533-47.
Jobst, A. A., (2007), “The Economics of Islamic Finance and Securitization,” Journal of Structured Finance,. 13(1 )(Spring), 1-22. Also published as IMF Working Paper 07/117 (Washington: International Monetary Fund).
Jobst, A.A., Kunzel, P., Mills, P. and Amadou S., (2008) Islamic bond issuance – What sovereign debt managers need to Know,” International Journal of Islamic & Middle East Finance and Management.. 1 (4,). 330-344
Kaleem, Ahmad. (2000). Modelling monetary stability under dual banking system: the case of Malaysia. International Journal of Islamic Financial Services, 2(1): 21-42.
Keeley, M., C. , (1990), Deposit insurance, risk, and market power in banking, The American Economic Review, 80, No. 5, pp. 1183-1200.
Khan, M.M., Bhatti, M. I., (2008). Development in Islamic banking: a financial risk-allocation approach Journal of Risk Finance, 9(1), .40-51
Khan, T., Ahmed, H., (2001). Risk management: an analysis of issues in Islamic financial industry. Islamic Research and Training Institute, Islamic Development Bank, occasional paper no. 5,
Kia, Amir. (2001). Interest-free and interest-bearing money demand: policy invariance and stability. Working Paper, Department of Economics, Emory University.
Kia, Amir and Darrat, A. F. (2003). Modelling money demand under the profit-sharing banking scheme: evidence on policy invariance and long-run stability. Paper presented at the ERF’s 10th Annual Conference, Marrakech, Morocco. December 16-18, 2003.
Kim, D., and A. Santomero, (1988), “Risk in Banking and Capital Regulation,” Journal of Finance, 43, 1219-33.
Koehn, M. and A.M. Santomero, (1980), “Regulation of Bank Capital and Portfolio Risk,”J (those failing to achieve the Basel requirement) Journal of Finance, 35, 1235-44.
Marshall, D.A., and. Prescott, E.S., (2000), “Bank Capital Regulation with and Without State-Contingent Penalties,” Federal Reserve Bank of Chicago Working Paper, 10.
Marston, D., Shabsigh, G., and Sundararajan, V.,(1998), “Monetary Operations and Government Debt Management Under Islamic Banking,” IMF
Mishkin, Frederic S.(1999). Financial consolidation: dangers and opportunities,” Journal of Banking and Finance, 23, 675–91.
Moktar, H.S., Abdullah, N., and Al-Habshi, S. (2006), “Efficiency of Islamic Banks in Malaysia: A Stochastic Frontier Approach,” Journal of Economic Cooperation among Islamic Countries,. 27(2), 37–70.
Pyle, H.D. , (1971), “On the theory of Financial Intermediation,” Journal of Finance, 26, 737-747.
Rime, B., (2001), “Capital Requirements and Bank Behavior: Empirical Evidence for Switzerland,” Journal of Banking and Finance, 25, 798-805.
Rochet, J.C., (1992), “Capital Requirements and the Behavior of Commercial Banks”, European Economic Review, 36, 1137-78.
Samad, A., Hassan, M. K., (1999). The performance of Malaysian Islamic Bank during 1984-1997: An exploratory study. International Journal of Islamic Financial Services, 1.
Sarker, M. A. A., (1999). Islamic banking in Bangladesh: performance, problems, and prospects. International Journal of Islamic Financial Services, 1.
Schaeck, Klaus, Martin Čihák, and Simon Wolfe, (2006), “Are More Competitive Banking Systems More Stable?,” IMF Working Paper 06/143 (Washington: International Monetary Fund).
Scheicher, M., (2008). How has CDO market pricing changed during the turmoil? Evidence from CDS index tranches. European Central Bank, Working Paper SerieS NO 910
Shrieves, R. E. and D. Dahl, (1992),”The Relationship between Risk and Capital in Commercial Banks,” Journal of Banking and Finance, 16, 439-57.
Siddiqui (2008) Financial contracts, risk and performance of Islamic banking Managerial Finance. 34(10), 680-694
Sturm, M., Strasky, J., Adolf, P., Peschel, D., (2008). The Gulf Cooperation Council Countries - economic structures, recent developments and role in the global economy ECB Occasional Paper No. 92
Sundararajan, V.,, and Errico, L., (2002). Islamic Financial Institutions and Products in the Global Financial System: Key Issues in Risk Management and Challenges Ahead,” IMF Working Paper No. 02/192 (Washington: International Monetary Fund).
Van Roy, P., (2003), “Impact of the 1988 Basel Accord on banks’ capital ratios and credit risk taking: an international study”, European Center for Advanced Research in Economics and Statistics, Universite Libre de Bruxelles, Working Paper.
Woertz, E., (2008) Impact of the US Financial Crisis on GCC Countries. Gulf Research Paper Report, October
Yudistira, D., (2004). Efficiency in Islamic Banking: An empirical analysis of eighteen banks. Islamic Economic Studies, l12 (1), 1–19.