To read this content please select one of the options below:

Are Islamic and conventional banks decoupled? Empirical evidence from Turkey

Shabeer Khan (Department of Islamic Economics and Finance, Sakarya University, Serdivan, Turkey)
Hakan Aslan (Department of Islamic Economics and Finance, Sakarya University, Serdivan, Turkey)
Uzair Abdullah Khan (Sukkur IBA University, Sukkur, Pakistan)
M.I. Bhatti (La Trobe Business School, La Trobe University, Melbourne, Australia) (S. P. Jain School of Global Management, Lidcombe, Australia)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 16 December 2022

56

Abstract

Purpose

This study investigates the determinants of net interest margin (NIM) and tests the decoupling hypothesis in Turkey's Islamic and conventional banks.

Design/methodology/approach

This study has employed a panel quantile model (PQM) to assess the net interest margin (NIM) and test the decoupling hypothesis in the dual banking system of Turkey.

Findings

The empirical results show that the impact of equity is positive for both Islamic and conventional banks but relatively more robust for Islamic banks. Moreover, it is observed that return on assets has a positive association with NIM in both types of banking systems. Interestingly, the impact increases from lower to higher quantiles, but a higher acceleration rate is observed for Islamic banks. The study also finds that, as bank stability increases, NIM decreases for both groups of banks but more stably for Islamic banks, resulting in lower margins than conventional banks. Thus, the paper confirms the decoupling hypothesis and suggests that, to increase profit margins, Islamic banks need to increase assets and equity.

Practical implications

The paper confirms the decoupling hypothesis and suggests that to increase profit margin, Islamic banks need to increase assets and equity.

Social implications

Since both equity and assets contribute positively to interest margins, policymakers in the industry need to increase the size of equity and assets to get maximum returns.

Originality/value

This is one of the first studies to investigate NIM's determinants and test the decoupling hypothesis in the Turkish dual banking system using a non-parametric MCMC panel quantile regression (QRM) model.

Keywords

Citation

Khan, S., Aslan, H., Khan, U.A. and Bhatti, M.I. (2022), "Are Islamic and conventional banks decoupled? Empirical evidence from Turkey", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-08-2022-1233

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

Related articles