A Comparative Study Of The Financial Performance Of Islamic And Conventional Banks The Case Of Malaysia

Author : Sutan Emir Hidayat
Publisher :
ISBN 13 :
Total Pages : 376 pages
Book Rating : 4.:/5 (957 download)

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Download or read book A Comparative Study on the Impacts of the 2007-2008 Financial Crisis Into Islamic and Conventional Banks Financial Performance in the Gulf Cooperation Council Countries written by Sutan Emir Hidayat and published by . This book was released on 2013 with total page 376 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 2007-2008 global financial crisis has given a significant impact on the banking industry worldwide. On the other hand, Islamic banks are claimed that they are either not affected or less affected by the crisis (Smolo and Mirakhor, 2010; Ahmad, 2010). However, such claims need to be proven empirically. Therefore, this study aims to compare financial performance of Islamic and conventional banks in the Gulf Cooperation Council (GCC) member countries via financial statements using 21 Islamic banks and 35 conventional banks as samples which are available on Bankscope database as an attempt to compare the impacts of the global financial crisis on the financial performance of both types of banks. The study uses financial ratios to comparatively analyze financial performance of Islamic and conventional banks in terms of profitability and efficiency, asset quality, capital adequacy and liquidity for each country in the region during 2005-2010. The study also uses standard deviation, the Mann Whitney and/or t-test to compare the stability of financial performance between Islamic and conventional banks in the GCC during the 2005-2010. This study also uses panel data regression analysis in order to examine the factors that significantly influence financial performance of Islamic and conventional banks in the GCC during the period and to evaluate the influence of the financial crisis into financial performance of both banks. The results of the ratio analysis show both Islamic and conventional banks' financial performance is affected by the financial crisis. However, the ratios are unable to conclude which type of banks performed better during the period since the results in each country indicate different inferences. The only common results across the GCC member countries is conventional banks in the GCC have better asset quality than their Islamic counterparts. The result of standard deviation reveals that during 2005-2010, financial performance of Islamic banks in the GCC is less stable than their conventional counterparts in terms of profitability and efficiency, asset quality, capital adequacy and liquidity. In addition, the Mann Whitney and t-test indicate that there are significant differences in the stability of all aspects of financial performance between Islamic and conventional banks in the GCC. The results of panel data regression analysis reveal that the financial crisis significantly affects both Islamic and conventional banks in the GCC. The impacts of the crisis are even worse in the two years after the crisis. The regression results also identify that equity, short term funding, GDP per capita significantly influence financial performance of Islamic and conventional banks in the GCC. It is also found that overhead expenses only significantly influence financial performance of Islamic banks while total assets and total financings only significantly influence financial performance of conventional banks. The study adds value to the existing literature by providing comparative empirical evidences on the impacts of the recent financial crisis into Islamic and conventional banks' financial performance in the GCC. The study is also expected to benefit regulators, bankers and other stakeholders of Islamic and conventional banks in the GCC in understanding the factors that influence GCC banking financial performance and minimizing the impacts of any future financial crises.loss.