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The impact of COVID-19 on financial structure and performance of Islamic banks: a comparative study with conventional banks in the GCC countries

Hani El-Chaarani (Department of Business Administration, Beirut Arab University, Beirut, Lebanon)
Tariq H. Ismail (Department of Accounting, Cairo University, Cairo, Egypt)
Zouhour El-Abiad (Department of Finance, Lebanese University, Beirut, Lebanon)
Mohamed Samy El-Deeb (Department of Business Administration, October University for Modern Sciences and Arts, Giza, Egypt)

Journal of Economic and Administrative Sciences

ISSN: 2054-6238

Article publication date: 28 February 2022

Issue publication date: 27 November 2024

2390

Abstract

Purpose

The aim of this paper has twofold: (1) to explain and compare the financial evolution of Islamic and conventional banking sector in the Gulf Cooperative Council (GCC) countries before and during the COVID-19 pandemic and (2) to explore the key success factors that might affect Islamic and conventional banks performance before and mainly during COVID-19 pandemic period.

Design/methodology/approach

Orbis Bank Focus database and annual financial reports are used to collect financial information of Islamic and conventional banks in GCC countries over four years: 2017, 2018, 2019 and 2020. Descriptive statistics, T-test, multiple regression, and 2SLS and GMM models are employed to analyze the financial structure and performance of Islamic and conventional banks before and during the COVID-19 pandemic period.

Findings

Results of this study reveal that (1) there is a significant difference between Islamic banks and conventional banks during the crisis of COVID-19, where the conventional banks have presented a higher level of financial performance and financial liquidity than their Islamic counterparts, (2) conventional banks have revealed higher capacity to manage their financial risk during the crisis period, and (3) a high level of non-performing loan, high inflation rate and high percentage of non-important cost have a negative impact on the financial performance of Islamic banks mainly during the pandemic period of COVID-19. However, the result indicates that a high level of liquidity risk increased the performance of Islamic banks but this impact falls sharply during the pandemic period.

Originality/value

This study provides information that supports investors, regulators and executive managers in GCC countries. A well-structured balance sheet would improve the financial performance and risk management of the banking sector in GCC countries, especially in times of crisis and pandemics.

Keywords

Citation

El-Chaarani, H., Ismail, T.H., El-Abiad, Z. and El-Deeb, M.S. (2024), "The impact of COVID-19 on financial structure and performance of Islamic banks: a comparative study with conventional banks in the GCC countries", Journal of Economic and Administrative Sciences, Vol. 40 No. 4, pp. 769-797. https://doi.org/10.1108/JEAS-07-2021-0138

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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