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Article
Publication date: 7 August 2017

Muhammad Rizky Prima Sakti, Mohamad Ali Tareq, Buerhan Saiti and Tahir Akhtar

This paper aims to critically evaluate theoretical and empirical research into capital structure practices in Islamic banks (IBs) from four perspectives, namely…

Abstract

Purpose

This paper aims to critically evaluate theoretical and empirical research into capital structure practices in Islamic banks (IBs) from four perspectives, namely, theoretical aspect and its nature, determinants of capital structure in IBs, links between capital structure and risk management and nexus between capital structure and performance of IBs.

Design/methodology/approach

The authors will review and examine past studies on IBs’ capital structure from both theoretical and empirical research.

Findings

The paper concludes that most of the literature on IB capital structure is largely theoretical than empirical. The existing studies on IB capital structure have various limitations, which suggest a need for detailed empirical work. Detailed empirical research in the field of capital structure will support bank managers and policymakers in making decisions about improving capital structure.

Originality/value

This research will make several noteworthy contributions to address literature gaps for IB capital structure. Furthermore, this paper will identify areas for future research into capital structure practices and IB financing decisions. Lastly, this paper will equip regulators with guidelines for establishing sound capital requirements for IB.

Details

Qualitative Research in Financial Markets, vol. 9 no. 3
Type: Research Article
ISSN: 1755-4179

Keywords

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Article
Publication date: 8 May 2018

Tahir Akhtar, Mohamad Ali Tareq, Muhammad Rizky Prima Sakti and Adnan Ahmad Khan

This study aims to provide a review of corporate governance and cash holdings because strong corporate governance is necessary for the efficient utilization of firm’s…

Abstract

Purpose

This study aims to provide a review of corporate governance and cash holdings because strong corporate governance is necessary for the efficient utilization of firm’s liquid resources such as cash, to minimize the agency cost of high cash holdings and to improve the value of cash.

Design/methodology/approach

The authors provide a literature review of corporate governance and cash holdings through a conceptual and theoretical argument rather than empirical research.

Findings

The authors review an empirical and theoretical work surrounding key corporate governance variables and identify avenues for future research. The authors find that corporate governance mechanisms and cash holdings have received much attention during the past two decades. However, the significant role of corporate governance (both country-level and the firm-level) in controlling the entrenched behaviour of the managers is discussed separately in the literature. The combined effect of both country-level and the firm-level governance is lacking in the cash holdings literature. Additionally, this study has found that much attention is paid to the developed markets, while only a few focused on the developing markets regarding cash holding literature, although the agency problems are high in developing markets.

Originality/value

The study contributes to the growing literature on corporate governance and cash holdings and provides a further understanding of the role of governance in minimizing the agency cost to increase value by assuring that firms’ assets are used efficiently and productively in the best interests of investors and other stakeholders. In addition, it provides a new idea to the policymaker and future researchers where they need to do more work.

Details

Qualitative Research in Financial Markets, vol. 10 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

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Article
Publication date: 8 May 2018

Muhammad Rizky Prima Sakti and Azhar Mohamad

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

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Journal of Islamic Accounting and Business Research, vol. 9 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 23 May 2018

Muhammad Rizky Prima Sakti, Mansur Masih, Buerhan Saiti and Mohammad Ali Tareq

The purpose of this paper is to examine the extent to which the Indonesian Shariah compliant investors can benefit from the portfolio diversification with the Islamic…

Abstract

Purpose

The purpose of this paper is to examine the extent to which the Indonesian Shariah compliant investors can benefit from the portfolio diversification with the Islamic indices of its trading partners and selected commodities such as gold, crude oil, and cocoa.

Design/methodology/approach

The authors use daily time series data covering both Islamic and commodity indices starting from June 4, 2007 until December 30, 2016 by the application of multivariate-generalized autoregressive conditional heteroscedastic and continuous wavelet analysis.

Findings

The findings tend to indicate that investors with exposure in Shariah compliant indices of Indonesia and wanting to gain more diversification benefits should invest either in the USA or India Islamic equity. Instead, the greater benefits will be obtained by Shariah compliant investors if they invest in the USA Islamic indices during long-term investment horizons. If investors want to invest in medium investment horizons, investing in India Islamic equity is a viable option. The findings further suggest that gold has a role of diversification benefits as a “safe haven” instrument for investors. It is advisable for the investors that have exposure in commodities (gold, crude oil, and cocoa) and want to invest in Indonesian Islamic equity, they should hold the portfolio for not more than 16 days to gain diversification benefits.

Originality/value

The results of this study are expected to have crucial implications for the Indonesia Shariah compliant investors and portfolio managers because it will help them to understand portfolio diversification benefits with different stock holding periods or investment horizons.

Details

Managerial Finance, vol. 44 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 3 May 2016

Muhammad Rizky Prima Sakti, Ahmad Syahid, Mohammad Ali Tareq and Akbariah Mohd Mahdzir

The purpose of this study is to investigate shari’ah scholars’ views and experiences pertaining the shari’ah issues, challenges and prospects in Islamic derivatives…

Abstract

Purpose

The purpose of this study is to investigate shari’ah scholars’ views and experiences pertaining the shari’ah issues, challenges and prospects in Islamic derivatives. Specifically, this paper critically examines the criticisms toward conventional derivative instruments and the controversies surrounding underlying contracts and current Islamic derivative products.

Design/methodology/approach

This study uses qualitative methods to form a deeper understanding of shari’ah scholars’ perception and experience on Islamic derivatives. Semi-structured interviews were conducted with five shari’ah scholars who are currently working in Islamic financial institutions in Malaysia and Singapore. This study used phenomenological techniques for its data analysis.

Findings

This study has found that shari’ah scholars are aware of the shari’ah issues surrounding Islamic derivatives and have provided comprehensive insight on the solution to these issues. It was found that it is important to take into account the derivatives instruments in Islamic financial industry because of the need for hedging and risk mitigation within Islamic financial institutions. Nonetheless, the study has also found that the use of wa’ad contracts to structure Islamic profit rate swaps and foreign currency exchanges are problematic because of it having features of bay’ al-kali’ bil-kali (the sale of one debt for another).

Originality/value

This study is one of few studies that highlight the shari’ah issues of Islamic derivatives in Islamic banking and finance industry. This paper is of value in discussing risk management and Islamic derivatives in Islamic financial institutions and how there are many issues under the investigation process, particularly issues related to controversial underlying contracts and products.

Details

Qualitative Research in Financial Markets, vol. 8 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

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Article
Publication date: 22 June 2021

Sutan Emir Hidayat, Muhammad Rizky Prima Sakti and Raqiya Ali Abdullah Al-Balushi

The purpose of this study is to critically evaluate how conventional and Islamic banks trade off risk, efficiency and financial performance in their business models, to…

Abstract

Purpose

The purpose of this study is to critically evaluate how conventional and Islamic banks trade off risk, efficiency and financial performance in their business models, to investigate how patterns of risk and efficiency vary between conventional and Islamic banks and to critically evaluate how the profitability of conventional and Islamic banks varies following the financial crisis.

Design/methodology/approach

This study uses univariate and multivariate statistical techniques by investigating 12 Islamic banks and 34 conventional banks operating in the Gulf Cooperation Council (GCC) region has been studied over the period 2011–2018.

Findings

The results suggest that Islamic and conventional banks differ not in the levels of efficiency, risk and profitability, but rather in how risk and efficiency influence banks’ financial performance. Islamic banks are found to be less influenced by the adverse effects of credit risk, which is consistent with the risk-sharing nature of Islamic financing. However, the results only hold for return on assets (ROA) and return on equity (ROE) while the net interest margin is observed to be negatively influenced by credit risk. Lower cost-income efficiency is also found to boost ROA and ROE of Islamic banks which could be attributed to a larger share of non-interest revenues due to Sharīʿah-compliance.

Research limitations/implications

From a theoretical point of view, this study helps to understand the risk, efficiency and financial performance of Islamic banks in comparison with conventional banks.

Practical implications

The results of this study can serve bank managers, regulators and shareholders. Policymakers should encourage a more risk-sharing structure of Islamic financing as it brings less adverse effects of credit risk and increases income sustainability for Islamic banks. The present study may help bank managers to improve the financial performance of their firms by controlling risk and efficiency. The study results also have implications for shareholders and depositors of Islamic and conventional banks as they should have a predetermined position about the level of credit risk and efficiency in each banking system.

Originality/value

The foremost contribution is that this is one of the few studies to compare risk, efficiency and financial performance of Islamic and conventional banks in the GCC region. By using the latest data, this paper hopes that the findings will be more relevant than previous studies to the current situation of the banking industry in the region.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 4
Type: Research Article
ISSN: 1759-0817

Keywords

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