Munich Personal RePEc Archive

Panel Modeling of Z-score: Evidence from Islamic and Conventional Saudi Banks

Ghassan, Hassan B. and Guendouz, Abdelkarim (2018): Panel Modeling of Z-score: Evidence from Islamic and Conventional Saudi Banks. Published in: International Journal of Islamic and Middle Eastern Finance and Management No. https://doi.org/10.1108/IMEFM-04-2018-0122 (8 July 2019)

[img] PDF
MPRA_paper_95239.pdf

Download (1MB)

Abstract

Several studies on the banking sector have shown that Islamic banks are more financially robust and stable compared to conventional banks, mostly in periods of financial crises. The aim of this research is to measure and compare the level of stability between Islamic and conventional banks in Saudi Arabia using quarterly data. The sample covers around two-thirds of banks operating in the Saudi stock market, and data comprises the last global financial crisis. The panel data model shows that Islamic banks relatively reduce the financial stability index; meanwhile, they contribute efficiently to enhance financial stability through the diversification of their assets. According to our findings Riyad Bank and SAMBA positively impact the financial stability, while Al-Rajhi bank has a positive but moderate role in enhancing the banking stability. As well, the Saudi banking sector exhibits a weak competitiveness which negatively impact the banking stability. Consequently, the limited presence of Islamic banks in the Saudi banking sector menaces any efforts to improve the financial stability.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.