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There are some Muslims who only hold conventional bank accounts, regardless that some believe that such banks implement an interest charging system that contradicts Islamic law concerning the prohibition of charging interest. This study aims to investigate the consumers’ tendency to regret (CTR) related to purchasing conventional banking services (CTR-P) and the failure to purchase Islamic banking services (CTR-NP). Then, this study investigates whether CTR-P and CTR-NP translate into regret, which, in turn, leads to the intention to save money in Islamic banks.

A survey of Indonesian Muslims who only hold conventional banking accounts was conducted. There were 323 participants. This study then applied a partial least square structural equation modeling (PLS-SEM) to test the hypotheses.

This study found that a combination of CTR-P and CTR-NP translates into regret, which then drives the intention to save money in Islamic banks as a means of releasing such feelings of regret. The findings suggest that Muslims evaluate their banking decision on an Islamic basis and that making a decision that contradicts the prohibition of charging interest tends to cause regret. Islamic banks have opportunities to penetrate the market by focusing on Muslims who only hold accounts with conventional banks.

The findings of this study help advance understanding of Muslims’ negative emotional experience due to making a decision that they perceive contradicts Islamic law. Also, the findings help predict the strategy that Muslims use to neutralize such a negative emotional experience.

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.

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.

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.

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.

The purpose of this paper is to study earnings management practices of Islamic banks and conventional banks in the Middle East region. First, the authors examine factors that may influence Islamic banks managers' use of discretion in reporting loan loss provisions (LLP). Second, the authors investigate differences that may exist between Islamic banks and non-Islamic banks in terms of discretionary loan loss provisions (DLLP) used to manipulate accounting earnings.

This empirical study uses an unbalanced panel data of 21 Islamic banks, 18 conventional banks with Islamic windows and 33 conventional banks, from seven Middle East countries during a period that ranges from 2000 to 2008. The authors use a two-stage approach in order to examine factors that may influence the use of discretion by Islamic banks' managers.

The empirical results reveal that Islamic banks use DLLP for both earnings and capital management. External financing is also found to be a determinant of DLLP. Additional findings show no significant differences among Islamic banks, conventional banks with Islamic windows and conventional banks in using DLLP. These three groups of banks behave similarly in terms of discretion based on DLLP.

The findings are potentially useful for regulators, auditors and investors. This study provides regulators with insights to strengthen their financial regulations in order to improve accounting quality. In addition, it helps auditors when considering the provisioning policies adopted by banks in order to detect specific manipulations of accounting earnings. The results may also help investors to focus on the impact of managerial discretion on accounting earnings for evaluation purposes.

This study contributes to the literature on Islamic banking. On the one hand, it extends prior research by examining the discretionary component of LLP, instead of being restricted to total LLP. On the other hand, it compares the use of discretion among three groups of banks: full Islamic banks, conventional banks with Islamic windows and full conventional banks.

This paper aims to identify and analyze the similarities and differences of the liquidity risk determinants within conventional and Islamic banks.

This study uses a dynamic panel data approach to examine the relationship between liquidity risk and a set of bank-specific and macroeconomic factors during 2005–2015, by selecting 27 Islamic banks and 49 conventional ones operating in the MENA region. More specifically, the dynamic two-step generalized method of moment estimator technique introduced by Arellano and Bond (1991) is applied.

The results suggest that the set of bank-specific variables influences the liquidity risk of both banking systems, while macroeconomic factors determine the liquidity risk of conventional banks. Islamic banks are not affected by macroeconomic determinants.

The research facilitates to the academicians, practitioners and bankers to have an alluded picture about liquidity risk determinants and their management. The findings can be used by bankers’ policy decision-makers to improve and enhance their consideration for liquidity risk management in both banking systems. Indeed, the study makes them aware to manage liquidity risk differently between conventional and Islamic banks, as the results reveal different liquidity risk determinants.

Compared to the abundant studies on the determinants of credit risk, researchers have not sufficiently addressed the factors influencing liquidity risk. Moreover, none of these few research studies has discussed and compared liquidity risk determinants within both banking systems operating in the Middle East and North Africa (MENA) region. This leads us to identify the similarities and differences between conventional and Islamic banks in the MENA region in respect of systematic and unsystematic determinants of the liquidity risk. The value is attributed to the increasing differentiation between Islamic and conventional banks. Islamic banks are characterized with a different liquidity structure distinguishing them from their conventional counterparts.

The purpose of this paper is to examine the impact of base lending rate (BLR), consumer prices, gross domestic product, money supply (M₃), Karachi stock exchange composite index, KIBOR, and profit rate of Islamic banks on deposits of both conventional and Islamic banks in Pakistan.

Quarterly data of six years (2006-2011) are obtained from 30 banks, consisting of 25 conventional and five Islamic banks. The short-run as well as long-run relationships among these variables are examined by utilizing advanced time series approach. Bounds testing and autoregressive distributed lag have been used to examine cointegration and error correction framework for short-run dynamics.

The empirical results reveal that variables such as interest rate of conventional banks, profit of Islamic banks, consumer prices, M₃, and BLR have different impact on conventional and Islamic bank deposits. Depositors of conventional and Islamic banks are sensitive to the returns received on deposits. A boost in interest rate increases the deposits of conventional banks but decreases those of Islamic banks.

This study signifies that customers of Islamic banks are motivated by profit. This indicates the normal behavior of customers, hence endures the substitution effect in conventional system. The study has important implications for Islamic banks to offer more competitive rates of profit with respect to the interest rate of conventional banks in order to collect more deposits. It also identifies relevant policy implication for the central bank of the country.

This paper aims to empirically assess the contribution of Islamic banks toward the financial stability of Pakistan. For this, the authors investigate the relative financial strength of Islamic banks and their contribution toward the financial stability. They also examine the relationship between the competitive conduct of banks and banking system stability.

The authors use quarterly data of ten conventional banks, four full-fledged Islamic banks and six standalone Islamic branches of conventional banks of Pakistan for the period 2006-2012. The z-score has been computed and used as the measure of stability of banks and the random effects estimator applied to quantify the impact of bank-specific variables and macroeconomic indicators on the financial stability. The empirical framework used in the paper enables the authors us to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks. To check the robustness of the results, the authors have estimated several models with different specifications.

The regression results indicate that income diversity, profitability ratio, loan to asset ratio, asset size and the market concentration ratio of banks have significant effects on the stability of banks. Comparing Islamic and conventional banks, notable differential effects of the empirical determinants of financial stability for Islamic and conventional banks have been observed. The results suggest that Islamic banks have performed better as compared to conventional banks and contributed more effectively in the stability of financial sector. Overall, the results depict that the contribution of Islamic banks toward the financial stability has been reasonable and prospective.

The empirical results of the paper are very useful not only for banks’ managements but also for the investors, bank customers and policymakers. Specifically, the findings help in enhancing our understanding as to how the bank-specific variables and macroeconomic indicators are related to the financial stability of the banking system. The results also help understand the role of both Islamic and conventional banks in the financial stability. Further, the results suggest that the financial soundness can be enhanced by creating healthy competition in the banking industry. The results about macroeconomic indicators imply that protective measures are required to intensify (mitigate) the positive (negative) effect of gross domestic product (inflation) on banks’ financial stability.

This paper provides an overall comparative analysis of financial stability of both Islamic and conventional banks of Pakistan. First, the paper computes the z-score for each bank included in the sample, and then, it performs the regression analysis to study how bank-specific variables and macroeconomic factors are related to the financial stability of banks. Unlike the previous studies, our empirical framework enables the authors to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks.

This paper aims to examine how Indonesian Islamic banks differ from conventional banks in terms of their business model, asset quality, stability and efficiency.

Based on data from 2008 to 2012, the authors use t-test, z-score and data envelopment analysis (DEA) to assess the business model, as well as the asset quality, stability and efficiency of both the Islamic and conventional banks.

The results indicate that there are significant differences between the two – Islamic banks appear to not follow the conventional business model. Secondly, Islamic banks seem to have better asset quality and to be more stable than their conventional counterparts.

Finally, the DEA results also indicate that Islamic banks are relatively more efficient than conventional banks, as shown by their higher overall efficiency, as well as technical efficiency.

This paper aims to assess the nature of competition between conventional and Islamic banks operating in Malaysia. It is an effort to enrich the existing literature by offering an empirical compromise on the differences in the results of studies related to competition between the two types of banks.

Secondary data on all banks operating in Malaysia’s diversified banking sector is collected from the FitchConnect database for the period 2011-2017. A non-structural measure of competition (H-statistic) as informed by Panzar–Rosse is used to measure the competition between conventional and Islamic banks. Panel data analysis techniques are used to estimate H-statistic. Wald test for the market structure of perfect competition/monopoly is used to affirm the validity and consistency of the results.

The findings of this study signify that the Malaysian banking sector operated under monopolistic competition during the period of study. The long-run equilibrium condition holds for the Malaysian banking sector. Competition among conventional banks is more intense than that among Islamic banks. Financial reform endeavours of Bank Negara Malaysia (BNM) along with the liberalisation wave of the financial system were successful in promoting competition, rendering the financial system contestable, resilient and dynamic.

Regulators and policymakers may find the results beneficial in terms of rethinking the number of banks operating in the Islamic sector. The number of banks, however, is not the only determinant of competition in the banking sector. Implications of competition change for stability and risk-taking behaviour of banks should be considered.

Within the context of Malaysia’s diversified banking system, given the contradictory results reported in studies on competition, this study is an effort to provide a plausible middle ground. It suggests a possible answer as to why competition nature has not changed since the policy change initiatives of BNM, namely, banks merger, expansion of Islamic banking operation scope and liberalisation process.

The purpose of this paper is to examine the determinants of bank margins in the Yemeni banking sector for Islamic and conventional banks. The first objective is to investigate whether there is a significant difference between the margins of conventional and Islamic banks. The second objective is to examine whether efficiency represents an influential factor in determining bank margins for Islamic and conventional banks controlling for other micro and macro variables.

Using a data set of banks in Yemen for the post-liberalisation period from 1996 to 2011, the study utilises panel data with unbalanced observations for 16 banks, of which four are Islamic banks and the remainder conventional banks. Parametric and non-parametric techniques are complemented by dummy variable regression using random effects. Panel fixed effects regression was also undertaken as a robustness check.

The paper finds that the overall bank margin in Yemen has steadily decreased during the observation period with the exception of the year 2011. The parametric and non-parametric results show that the bank margins are significantly higher for conventional banks than for Islamic banks. The results provide evidence that bank margins are related to neither types of efficiency, but are affected by capitalisation, size, the opportunity cost of the reserve and liquidity, although the impact is shaped differently for Islamic and conventional banks.

The paper provides a basis for regulators and bankers for assessing the viability of the banking sector and proposes policies to restructure the industry to enhance its performance.

This paper adds value to the literature for the Yemeni banking sector and extends the previous research on the determinants of bank margins by focusing on the impact of efficiency on bank margins. Also, it compares the Islamic banks with different types of conventional banks in Yemen in their margins trend.

Several studies have studied the points that distinguish Islamic banks from conventional ones. The corresponding conclusions are a bit contradictory. This paper aims to study the similarities between Islamic and conventional banks in the Gulf countries using a new approach, namely, the clustering method based on dynamic time warping (DTW) distance.

To study the similarities between Islamic and conventional banks, in Gulf Cooperation Council (GCC) countries, this study used the DTW distance. Then, a clustering based on this distance was carried out to find out which banks are the most similar. Finally, the authors have studied the factors that explain these similarities.

This empirical study covered 44 Islamic banks and 46 conventional banks in GCC countries during 2006–2015. The results show that Islamic and conventional banks are included in the same cluster for Qatar, Bahrain and Oman. In contrast, Islamic and conventional banks do not share the same cluster for the Kingdom of Saudi Arabia, Kuwait and the United Arab Emirates. This is because of the establishment of interest rates below discount rates. In this case, banks are incentivized to take more risks to compensate for interest losses, which increases efficiency and allocates Islamic and conventional banks to different clusters. Accordingly, there is no absolute discrimination because of the initial status between Islamic and conventional banks. However, the overall banks, either Islamic or conventional, are discriminated through the distance of the banking applied interest rate and the social discount rate.

DTW distance-based clustering is a very suitable method for emphasizing the similarities that may exist between conventional and Islamic banks. This technique has not previously been used in the literature in question.