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Maturity transformation risk is one of the leading causes of the global financial crisis. While endorsing the new Basel III liquidity reforms, the Islamic Financial Services Board has suggested a modified NSFR ratio as a structural measure for the maturity transformation function of Islamic banks, allowing for their unique balance sheet structure. The purpose of this paper is to analyze various firm-specific and macroeconomic factors that may significantly affect the maturity transformation risk of these banks.

Using an annual data set of 55 full-fledged Islamic banks from 11 different countries over a period from 2006-2015, this study utilizes a two-step system generalized method of moments estimation technique on an unbalanced panel data.

The empirical results reveal bank size, capital, less-risky liquid assets, risky liquid assets, external funding dependence and market power as significant bank-specific factors in determining maturity transformation risk. However, the authors find no evidence for the effect of bank credit risk on maturity transformation risk in Islamic banking system.

This is the first study that focuses on the measurement of maturity transformation risk and its determinants in Islamic banks in a cross-country context, with regards to new liquidity regulatory requirements as proposed by Islamic Financial Services Board (IFSB) in conjunction with Basel III.

The purpose of this study is to investigate factors influencing the net stable funding ratio (NSFR) in the Islamic banking system. More specifically, the authors analyze the impact of the deposit structure on the liquidity ratio using the two-step generalized method of moments approach during the 2000–2014 period.

Based on IFSB-12 and the GN-6, the authors calculated the NSFR for 35 Islamic banks operating in the Middle East and North Africa (MENA) region.

The findings of this study show the following: first, ratio of profit-sharing investment accounts have a positive impact on the NSFR, while ratio of non profit-sharing investment accounts increase the maturity transformation risk; second, the results highlight that asset risk, bank capital and the business cycle have a positive impact on the liquidity ratio, while the returns on assets, bank size and market concentration have a negative impact; and third, these results support the IFSB’s efforts in developing guidelines for modifying the NSFR to enhance the liquidity risk management of institutions offering Islamic financial services.

The most prominent limitation of this research is the availability of data.

These results will be useful for authorities and policy makers seeking to clarify the implications of adopting the liquidity requirement for banking behavior.

This study contributes to the knowledge in this area by improving our understanding of liquidity risk management during liquidity stress periods. It analyzes the modified NSFR that was adopted by the IFSB. Besides, this study fills a gap in the literature. Previous studies have used the conventional ratios to determinate the main factors of the maturity transformation risk in a full-fledged Islamic bank based on an early version of NSFR. Finally, most studies focus on the NSFR as proposed by the Basel Committee, whereas the authors investigate the case of the dual-banking system in the emerging economies of seven Arab countries in the MENA region.

The purpose of this paper is to examine liquidity risk in Pakistani banks and evaluate the effect on banks' profitability.

Data are retrieved from the balance sheets, income statements and notes of 22 Pakistani banks during 2004‐2009. Multiple regressions are applied to assess the impact of liquidity risk on banks' profitability.

The results of multiple regressions show that liquidity risk affects bank profitability significantly, with liquidity gap and non‐performing as the two factors exacerbating the liquidity risk. They have a negative relationship with profitability.

The period studied in this paper is 2004‐2009, due to availability of the data. However, the sample period does not impair the findings since the sample includes 22 banks, which constitute the main part of the Pakistani banking system. Moreover, only profitability is used as the measure of performance. Economic factors contributing to liquidity risk are not covered in this paper.

This is the first paper addressing the liquidity risk faced by the Pakistani banking system. Past researchers and practitioners have not given the proper attention to liquidity risk. This paper helps in understanding the factors of liquidity risk and their impact on the profitability of the banking system. The authors emphasise contemporary risk managers to mitigate liquidity risk by having sufficient cash resources. This will reduce the liquidity gap, thereby reducing the dependence on repo market.

Bank lending is the major source of monetary expansion. Bank-led money creation is a key issue in both conventional and Islamic financial systems. The purpose of this paper is to examine the issues related to Islamic banking money creation. In this conceptual paper, the authors investigate the involvement of profit and loss sharing (PLS) in money creation and especially how can PLS limit money creation “out of nothing.” In this regard, the authors examine the potential of the PLS principle in tackling the excessive money creation phenomenon.

This study uses a normative approach regarding Islamic bank money creation that fits Sharia directives. In fact, this study discusses “what ought to be,” that is, the values and norms of PLS money creation that impede excessive money creation.

Overall, Islamic banks create money differently compared to conventional ones. Especially, by avoiding a purely financial intermediary, money creation under the PLS principle sustains a strong relationship with the real economy and leads to a lower money multiplier. Therefore, PLS mechanisms allow financing through real assets and not credit assets “out of nothing.” This could prevent excessive money creation from causing harmful effects on indebtedness and financial instability.

PLS offers a valuable resolution for banking system money creation through the optimization of Islamic bank financing by facilitating the separation of the monetary function from the credit one. This reform thought reinforces the stability value of money allowing it to fully perform its functions with reference to the directives of Sharia. This especially allows the integrity and purchasing power of money, the reduction of the gap between the evolution of both real and financial economies and, consequently, the indebtedness and crisis. It is recommended to promote PLS financing by reforming institutional and regulatory constraints.

This study addresses the contemporary issue of money creation by Islamic banks through the PLS approach. The conceptual framework of this paper highlights the reformist role of PLS in limiting money creation through Mudarabah approach within fractional reserve banking.

This paper aims to improve the debate linking the business models of banks to their riskiness by checking if diversification exerts different impacts on the probability of bank distress depending on the level of capital buffers.

The paper focuses on a sample of listed bank holding companies observed between 2007:Q3 and 2022:Q4. The authors use three subindexes of bank diversification. The authors estimate a dynamic model specification using a system generalized method of moments with robust standard errors and consistent estimators under heteroskedasticity and autocorrelation within a panel. Sensitivity and robustness checks are performed.

Asset and income diversification increase the probability of distress in low-capitalized banks during normal periods (excluding periods of crises and high uncertainty). Concerning crisis periods, a marginal increase in asset diversification during the global financial crisis (GFC) and the COVID-19 pandemic crisis induces a more important increase in the probability of failure of well-capitalized banks relative to low-capitalized ones. Contrary to the results obtained for the GFC period, well-capitalized banks were found to pursue more careful funding diversification in reaction to the sudden increase of uncertainty during the Russia–Ukraine war.

Prudential supervision should concentrate on well-capitalized banks to encompass unexpected excessive risk-taking during crisis periods. Regulatory requirements should constrain fragile banks to avoid pursuing assets and income diversification strategies that increase earnings volatility.

The main originality of this paper is to consider the interaction between three different dimensions of bank diversification and capital regulation during stable and unstable periods using the marginal effect analysis. Moreover, this paper uses, initially, the GFC as the reference crisis period to study the impact of capital buffers and diversification interactions on the probability of bank distress. Then, the authors extend the observation period until 2022:Q4 to include two additional major events, namely, the COVID-19 pandemic and the Russia-Ukraine war.

The paper aims to investigate whether the Islamic banks (IBs) and the conventional banks (CBs) could be distinguished from one another on the basis of their capital structure, profitability and their respective determinants with using a multivariate statistical method for analysis of data.

The paper provides a comparative study based on a predictive model, the binary logistic regression, using a sample of 53 listed CBs and 45 listed IBs from the Middle East region for the period 2006-2014.

The binary logistic regression reveals that profitability and capital structure are good predictors that help to distinguish between the two categories of banks. Results suggest that higher are the net margin and capital ratio, higher is the probability that the bank is Islamic. For the return on assets, results show that lower is this value; higher is the likelihood that the bank is Islamic. Regarding their related determinants, the findings suggest first that banks with higher dividend payout policy, financing ratio, costs ratio and insolvency risk are more likely to be Islamic. Second, results suggest that banks with lower collaterals, size and credit risk are more likely to be Islamic.

The study contributes to the growing literature on corporate finance and Islamic banking. Analyzing the capital structure and profitability of the two categories of banks is important for investors, financial analysts and regulators. Understanding the differences contributes to understand how following Islamic finance principles and being under Sharīʿah governance could impact the bank profitability and financial decision, as well as investors behavior.

The study contributes to the scare literature dedicated to the use of the multivariate statistical methods for the analysis of data to compare the financial characteristics of IBs and CBs.

The Financial Stability Board (FSB) determined that entities classified as shadow banking are of a credit nature because they are capable of affecting the financial system through the entry and exit of capital. This study aims at measuring the impact of shadow banking in the systemic risk in Chile. A sample of 91 institutions (Run) belonging to the mutual funds was used, with a series showing a continuous behaviour between 2004 and 2018.

The measurement is carried out using the conditional value at risk (CoVaR) methodology, which analyses the behaviour of an institution in a regular state against the same institution in a state of stress.

The results obtained reflect that liquidity mismatches do not have a relevant effect on the systemic risk, while the 2008 crisis does contribute to its decline.

There are less number of literature studies that apply statistical models regarding shadow banking, at least at a quantitative level, so this research is a beginning for other studies, supporting future authors in their new research as a basis.

El Consejo de Estabilidad Financiera determinó que las entidades clasificadas como Shadow Banking son de carácter crediticio debido a que son capaces de afectar al sistema financiero mediante la entrada y salida de capitales. Este estudio tiene como objetivo medir el impacto del Shadow Banking en el Riesgo Sistémico de Chile. Para esto se utilizó una muestra de 91 instituciones (Run) pertenecientes a los Fondos Mutuos, con series que muestran un comportamiento continuo entre 2004 y 2018.

La medición se lleva a cabo mediante la metodología CoVaR, la cual analiza la conducta de una institución en estado normal versus la misma institución en estado de estrés.

Los resultados obtenidos reflejan que los desajustes de liquidez no tienen un efecto relevante en el Riesgo Sistémico, mientras que la crisis del 2008 si contribuye a la disminución de este.

Existe muy poca literatura que aplica modelos estadísticos respecto al Shadow Banking, al menos a nivel cuantitativo, por lo que esta investigación es un inicio para otros estudios, apoyando como base a futuros autores en sus nuevas investigaciones.

This study analyzes the impact of changes in bank capital on liquidity creation. More specifically, it tests “financial fragility – crowding out” and “risk absorption” hypotheses for Indian banks.

It uses the data of 136 listed and unlisted banks, ranging from the year 2000 to 2014. The analysis is based on panel data techniques.

There is negative relationship between narrow measure of bank liquidity creation and capital. Therefore, in the case of India, “financial fragility – crowding out” hypothesis holds for “cat nonfat” measure of liquidity creation. However, there is no relationship between “cat fat” measure of liquidity creation and capital, except for listed banks, and the banks in the pre-crisis period. In these two cases, “risk absorption” hypothesis holds. Furthermore, none of the hypotheses holds in the post-crisis period.

The higher capital requirements posed by the Basel III will result in lower on-balance-sheet liquidity creation, which may result in lower profitability for the banks. However, increase in capital does not affect off-balance-sheet liquidity creation, rather enhances it in case of listed banks. So, the managers may use risky off-balance-sheet liquidity creation to improve profitability. Therefore, the regulators must be vigilant to the off-balance-sheet activities of banks to avoid banking turmoil.

To the best of authors’ knowledge, this is the first study to explore which hypothesis regarding the relationship between bank capital and liquidity creation holds for Indian banks. It contributes to the existing literature by providing the empirical evidence that “financial fragility – crowding out” hypothesis holds for on-balance-sheet liquidity creation and “risk absorption” hypothesis holds for listed banks. It also points to the new direction that neither of the hypotheses holds in the post-crisis period in India.

This study aims to investigate three relevant antecedents of digital transformation (digital orientation, digital intensity and digital maturity) and their influences on the financial success of companies.

Building on the strategic management and digital transformation literature, five hypotheses are developed to find the relationships between these antecedents and financial success.

Digital orientation and digital intensity alone do not contribute to the financial success of companies. Specifically, digital intensity serves as a negative moderator between digital orientation and financial success, meaning that it reduces the performance effects of digital orientation. Digital maturity acts as a mediator between digital orientation and the financial success of companies and between digital intensity and the financial success of companies.

This research contributes to the literature on strategic management and digital transformation by providing a further understanding of three relevant antecedents of digital transformation (digital orientation, digital intensity and digital maturity) and how they should be positioned alongside digital transformation settings to achieve financial success.