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Article
Publication date: 26 September 2022

Kamshat Kanapiyanova, Alimshan Faizulayev, Rashid Ruzanov, Joanna Ejdys, Dina Kulumbetova and Marei Elbadri

This paper aims to explore the drivers of banking stability in the case of QISMUT+3 countries (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates, Turkey, Pakistan…

Abstract

Purpose

This paper aims to explore the drivers of banking stability in the case of QISMUT+3 countries (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain) focusing on social and governmental responsibility (SGR) determinants. Both main indicators of banking stability, namely, profitability and nonperforming loans, were treated as dependent variables. The model is examined with the whole sample and separately by examining commercial banks and Islamic banks.

Design/methodology/approach

Cross-country bank-level panel data spanning from 2011 to 2018 is used. Two-step system generalized methods of moments alongside both panel-corrected standard error and feasible generalized least squares models were applied to ensure the robustness of the results.

Findings

Findings reveal that capital adequacy and corruption control are the most dominant determinants of banking profitability in the studied sample regardless of the type of the bank. In addition, profitability, efficient management, inflation and government effectiveness were found to be the main drivers of financial vulnerability risk.

Practical implications

Findings of this study offer many insights and policy implications to help stakeholders gain a comprehensive understanding of banking stability. Suggested policy implications targeting bank management, governmental policymakers and investors are offered to better the banking stability of QISMUT+3 countries.

Originality/value

This paper has multiple contributions to the existing literature. The determinants of banking stability are examined in QISMUT+3 group of countries which is the focus of a limited number of studies. In addition, the use of a comprehensive variable set alongside the addition of SGR determinants in the case of banking system stability is one of the main contributions of this paper.

Details

Journal of Islamic Accounting and Business Research, vol. 14 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 10 June 2021

Alimshan Faizulayev, Isah Wada, Asset Sadvakasovna Kyzdarbekova and Indira Parmankulova

This study aims to examine the dynamics of banking competition between Islamic banks (IBs) and conventional banks (CBs) in emerging finance-oriented Islamic economies, also known…

Abstract

Purpose

This study aims to examine the dynamics of banking competition between Islamic banks (IBs) and conventional banks (CBs) in emerging finance-oriented Islamic economies, also known as the QISMUT + 3 (i.e. Qatar, Indonesia, Saudi Arabia, Malaysia, the United Arab Emirates, Turkey, Bahrein, Kuwait and Pakistan). The main aim was to conduct a comparative market power analysis between IBs and CBs in the 2006–2015 period.

Design/methodology/approach

The study used bank-specific and macro-economic variables available in the Orbis Bank Focus and the World Bank databases. The study applied a dynamic approach to detect endogeneity problems and unobserved heterogeneity using the two-step system GMM estimate.

Findings

The research shows that market power persists in both types of banks over time. It also demonstrates that capital adequacy does not explain the market power of banking in the studied countries. Unlike IBs, the scale of banking does not influence the market power CBs. Corruption undermines competition in the conventional banking system. However, because of the ideological orientation of IBs, corruption does not affect their competitiveness. IBs outperform CBs in QISMUT + 3 countries in terms of banking competitiveness. They also have higher persistency of market power in the region.

Practical implications

This study is a very beneficial source of information that can provide effective guidelines for efficient productivity and improved competitiveness of IBs and CBs in finance-oriented Islamic countries.

Originality/value

The study is the first to compare the market power of IBs and CBs in this country classification. In addition, the study examined a large number of IBs and CBs to carry out this research.

Details

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

Keywords

Article
Publication date: 27 April 2022

Indira Parmankulova, Parida Issakhova, Zhanar Zhanabayeva, Alimshan Faizulayev and Kulzira Orazymbetova

This study aims to investigate the determinants of banking stability in the case of QISMUT + 3 countries (Qatar, Indonesia, Malaysia, United Arab Emirates, Turkey, Pakistan…

Abstract

Purpose

This study aims to investigate the determinants of banking stability in the case of QISMUT + 3 countries (Qatar, Indonesia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain). Both profitability of banks and non-performing loans were treated as dependent variables. Three variations are examined, the sample as a whole and separated to conventional banks (CBs) and Islamic banks (IBs).

Design/methodology/approach

Data from 208 banks, both IBs and CBs, were used from 2011 to 2018, after global financial crisis period. Two-step system generalized methods of moments and both feasible least squares and panel-corrected standard error models were used to ensure test the data.

Findings

Results suggest that both financial vulnerability and profitability affect each other in both banking systems. In addition, capital adequacy has a positive link with both dependent variables. Corruption varied and followed expectations but for the case of CBs alone with an unexpected negative relationship with profitability.

Practical implications

The findings are expected to help bankers, investors, academics and policymakers gain a better understanding of Islamic banking. The findings would be useful in developing policy for the development of the banking industries in these countries.

Originality/value

This study contributes to existing literature in three ways. First, this study investigates the factors influencing banking non-performing loans for a new class of countries – QISMUT + 3 within 2011–2018 period. Second, only a few studies use such a period, which is after the global financial crisis period. Finally, new indicators are used to determine the non-performing loans and profitability of both types of banks, such as Muslim Share and Share of IBs.

Details

Journal of Islamic Accounting and Business Research, vol. 13 no. 6
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 1 March 2021

Agung Nur Probohudono, Astri Nugraheni and An Nurrahmawati

The purpose of this study is to analyze the impact of corporate social responsibility (CSR) disclosure on the financial performance of Islamic banks across nine countries as major…

Abstract

Purpose

The purpose of this study is to analyze the impact of corporate social responsibility (CSR) disclosure on the financial performance of Islamic banks across nine countries as major markets that contribute to international Islamic bank assets (Indonesia, Malaysia, Saudi Arabia, UAE, Kuwait, Qatar, Turkey, Bahrain and Pakistan or further will be called QISMUT + 3 countries).

Design/methodology/approach

Islamic Social Reporting Disclosure Index (ISRDI) is being used as a benchmark for Islamic bank CSR performance that contains a compilation of CSR standard items specified by the Accounting and Auditing Organization for Islamic Financial Institutions. The secondary data is collected from the respective bank’s annual reports and it used the regression analysis techniques for statistical testing.

Findings

This study found that CSR disclosure measured by ISRDI has a positive effect on financial performance. Almost all ISRDI sub-major categories have a positive effect on financial performance except the “environment” subcategory. The highest major subcategory for ISRDI is the “corporate governance” category (82%) and the “environment” category (13%) is the lowest. For the UAE, Kuwait and Turkey, the ISRDI is positively affected by financial performance and the other countries on this research are not.

Originality/value

This study highlighted the economic benefits of social responsibility practices as a part of business ethics in nine countries that uphold the value of religiosity. Thus, the development of the results of this research for subsequent research is very wide open.

Article
Publication date: 11 April 2018

Walid Mansour and M. Ishaq Bhatti

The purpose of this paper is to examine the new paradigm of Islamic corporate governance (ICG) in an emerging area of Islamic finance.

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Abstract

Purpose

The purpose of this paper is to examine the new paradigm of Islamic corporate governance (ICG) in an emerging area of Islamic finance.

Design/methodology/approach

The paper adopts an analytical approach to investigate the new executive and managerial roles that ICG is expected to play in the process of corporate financial decision making.

Findings

The authors argue that ICG is no longer expected to play the traditional supervisory and regulatory role within Islamic financial institutions. Indeed, the acuteness of competition, the observed failures of the Islamic finance industry, the unprecedented challenges, and the required ethical considerations levy as a new approach that improve the growth of the Islamic finance industry sustain its survival in the global financial world, and enhance the welfare of 25 percent of the world population who survived beyond all level of poverties.

Originality/value

The authors claim that ICG must be endowed with a multi-faceted, new paradigm for the purpose of improving the stakeholders’ interests and reaching the best business practices of the Islamic finance industry to cater investors’ need and the social well-being of the homeless and disadvantaged communities.

Details

Managerial Finance, vol. 44 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 11 April 2018

Husam-Aldin Nizar Al-Malkawi and Rekha Pillai

The purpose of this paper is to integrate conventional corporate governance (CG) mechanisms into the Islamic banking framework in order to examine their impact on Islamic banks…

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Abstract

Purpose

The purpose of this paper is to integrate conventional corporate governance (CG) mechanisms into the Islamic banking framework in order to examine their impact on Islamic banks (IBs) financial performance (IBFP) within the Gulf Cooperation Council (GCC) context.

Design/methodology/approach

The study uses a sample of 22 full-fledged IBs operating in the GCC countries over an 11-year period from 2005 to 2015. Using panel data approach, the paper develops an empirical model consists of five CG mechanisms and three control variables. The model parameters are estimated using feasible generalized least squares framework.

Findings

The results show that five internal CG mechanisms have statistically significant relationship with IBFP, measured by Q-ratio. Insider shareholding is found to be positively associated with IBFP, while institutional and government shareholdings are found to be negatively related to Q-ratio, the results being consistent with the agency theory, strategic alignment theory and property rights theory, respectively. Moreover, the results reveal that large board size and CSR engagement negatively influence IBFP, once again lending support to agency theory and trade off theory, respectively. The control variables, namely, leverage, size and age are also found to have a statistically significant relationship with IBFP.

Practical implications

IBs are urged to ensure transparency in the provision of innovative products fundamentally in contrast to conventional banking products as well as cater to the untapped markets by weaving Islamic values into the existing CG fabric, as a feasible solution to remain competitive.

Originality/value

The paper examines the relationship between internal CG mechanisms and financial performance of listed and non-listed full-fledged IBs operating in the GCC countries.

Details

Managerial Finance, vol. 44 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 22 August 2022

Samir Belkhaoui

The purpose of this paper is to investigate empirically the channels through which Islamic and/or conventional banking can spur economic growth in MENA region.

Abstract

Purpose

The purpose of this paper is to investigate empirically the channels through which Islamic and/or conventional banking can spur economic growth in MENA region.

Design/methodology/approach

The study uses a range of developed econometric approaches, including panel cointegration technique, panel Granger causality test and a panel-based vector error correction model (VECM), to analyze explicitly all the causal relationships among Islamic banking, conventional banking development and economic growth in a unified framework.

Findings

The empirical results show that Islamic banking in MENA countries not only leads to economic growth but also affects positively and significantly conventional banking development. Thus, Islamic banking has an active role and could be classified as “supply-following” since its development only leads to economic growth, whereas conventional banking, with passive role, could be classified as “demand-following” since it only reacts to economic growth in long run.

Research limitations/implications

The study has two principal limitations. It is conducted within a relatively limited time period and sample of countries. Also, the used models did not take into account the impact of others financial and macroeconomic variables like stock market development, interest rate, inflation and financial crisis.

Practical implications

The results have two main implications. First, in MENA countries, well-functioning Islamic banking sector could not only promote economic growth but also can be served as a development factor for their conventional one. Second, unlike conventional banks, the customer of Islamic banks seems not to be motivated by interest and profits. Rather religious factors are recommended as the main motive for investing and saving in Islamic banks.

Originality/value

The study tries to perceive whether there exists a substitution or complementarity effect between Islamic and conventional banking in promoting economic growth for MENA countries. This situation is neither revealed nor clarified in the relevant literature.

Details

Journal of Islamic Accounting and Business Research, vol. 14 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 11 May 2020

Souhir Neifar, Bassem Salhi and Anis Jarboui

The purpose of this study is to determine the effect of board effectiveness (BE) on financial performance and operational risk (OR) disclosure and the interaction effect of a…

Abstract

Purpose

The purpose of this study is to determine the effect of board effectiveness (BE) on financial performance and operational risk (OR) disclosure and the interaction effect of a bank’s Sharia Supervisory Board quality (SSB) with religious and ethical principles.

Design/methodology/approach

The data were collected from the annual financial reports of 25 Islamic banks (IBs) in the Gulf Cooperation Council countries over 2008-2017. The OR disclosure, the SSB quality and BE were measured using self-developed indices. The Tawhidi string relation methodology was used to establish the circular causal model. The moderating effect of the SSB quality on the performance, OR disclosure and board structure relationship was examined using the hierarchical regression analysis.

Findings

The main finding of this study is related to the positive moderating effect of SSB quality on the relationship between performance, OR disclosure and BE. This result seems to indicate that at a high level of SSB quality, even when the performance increase the IBs engage in complying with OR disclosure to inform the stakeholders on the real situation of the bank.

Practical implications

The finding of this research would be of great support to stakeholders and policymakers to make more pressure on IBs to improve the quality of their SSB structure and show more compliance with the governance recommendations. As an extension to this research, further study can examine other Islamic governance mechanisms such as Sharīʿah-compliant banks.

Originality/value

The present study provides a new addition to the prior literature by investigating the relationship between performance, BE, OR disclosure and the interaction effect of SSB quality. From an Islamic ethical, this research can also contribute to the growing discussion on SSB quality and performance.

Details

International Journal of Ethics and Systems, vol. 36 no. 3
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 31 October 2022

M. Kabir Hassan and Mustafa Raza Rabbani

The purpose of this study is to investigate the role of Auditing and Accounting Organization for Islamic Financial Institution (AOIFI) governance disclosure on the performance of…

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Abstract

Purpose

The purpose of this study is to investigate the role of Auditing and Accounting Organization for Islamic Financial Institution (AOIFI) governance disclosure on the performance of Islamic financial institutions (IFIs) through systematic literature review approach.

Design/methodology/approach

This study is based on the review of literature related to the AAOIFI accounting standards downloaded from Scopus database. This study includes review of 126 research articles, 10 review papers, 9 book chapters and 5 conference papers related to different roles played by AAOIFI in providing standards for accounting, auditing, governance and ethics for global IFIs.

Findings

The findings of this study suggest that AAOIFI has played a critical role in developing the accounting standards for the IFIs and contributed positively to the overall growth of the Islamic finance industry.

Practical implications

AAOIFI has played a critical role in issuing and development of accounting and auditing standards and has contributed positively to the financial performance of IFIs. Research gaps are identified, and there is a need to work on these gaps.

Originality/value

This study will contribute to the understanding the role of AAOIFI in issuing and development of accounting and governance standards and future research agenda based on a thorough review of literature.

Details

Journal of Islamic Accounting and Business Research, vol. 14 no. 5
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 13 November 2017

Mohamed Abdulnaser Janahi and Muneer Mohamed Saeed Al Mubarak

The purpose of this paper is to contribute to the Islamic banking literature by examining the impact of different factors of customer service quality on customer satisfaction.

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Abstract

Purpose

The purpose of this paper is to contribute to the Islamic banking literature by examining the impact of different factors of customer service quality on customer satisfaction.

Design/methodology/approach

The paper presents a model which is not frequently used in Islamic banking literature and shows relationships between six factors of customer service quality and customer satisfaction in the Islamic banking sector. Customers of five main Islamic banks are contributing in this study.

Findings

This paper demonstrates strong and positive relationships between the six main dimensions of customer service quality (Compliance, Assurance, Reliability, Tangibility, Empathy and Responsiveness) and customer satisfaction.

Research limitations/implications

The study may suffer from lack of generalization, as it is conducted in one country (Bahrain). It might also be useful to enlarge the study sample and include comparison between Islamic versus conventional banking with regard to service quality and customer satisfaction.

Practical implications

This paper can influence the current Islamic banks with regard to service quality with an ultimate aim of increasing customer satisfaction and retaining customers.

Originality/value

This study is one of the few that focus on effects of customer service quality dimensions on customer satisfaction in the Islamic banking sector. It reveals that, although customers pay special attention to Shariah laws (compliance) in their transactions with banks, the way services are delivered matters to them too.

Details

Journal of Islamic Marketing, vol. 8 no. 4
Type: Research Article
ISSN: 1759-0833

Keywords

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