Chatti, Mohamed Ali and Kablan, Sandrine and Yousfi, Ouidad (2010): Activity diversification and performance of Islamic banks in Malaysia.
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The current paper analyzes the performance and the choice of portfolio in Islamic banks. We consider a sample of 8 Malaysian universal Islamic banks between 2004 and 2008. We use the Herfindahl-Hirschman Index (HHI) as an indicator of the degree of diversification. The performance of the banks is measured by the return on assets ratio (ROA) and the Risk Adjusted Return On Capital ratio (RAROC). Finally, we use the Modern Portfolio Theory (MPT) of Markowitz to define the efficient frontier and the optimal portfolio.The results show that the corporate and investment activity increases significantly returns on assets. However, retail and commercial activity improves the results and performance of these banks. We find evidence that the level of diversification is not too high and recommend that they become concentrated on just one type of these activities. Finally, the MPT supports the idea that Islamic banks are not efficient.
|Item Type:||MPRA Paper|
|Original Title:||Activity diversification and performance of Islamic banks in Malaysia|
|Keywords:||Diversification, performance, Islamic banks, Herfindhal Hirschmann Index, Modern Portfolio Theory.|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions
C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Prof. Sandrine Kablan|
|Date Deposited:||08 Mar 2011 10:46|
|Last Modified:||25 Sep 2016 10:23|
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Activity diversification and performance of Islamic banks in Malaysia. (deposited 23 Jan 2011 21:30)
Activity diversification and performance of Islamic banks in Malaysia. (deposited 03 Mar 2011 19:57)
- Activity diversification and performance of Islamic banks in Malaysia. (deposited 08 Mar 2011 10:46) [Currently Displayed]
- Activity diversification and performance of Islamic banks in Malaysia. (deposited 03 Mar 2011 19:57)