The Impact of the Global Financial Crisis on the Financial Institutions : A Comparison between Islamic Banks ( Ibs ) and Conventional Banks ( Cbs )

2013 ◽  
Vol 9 (3) ◽  
pp. 69-88 ◽  
Author(s):  
Fatma Zehri ◽  
Najya Al-Herch
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Global Financial Crisis ◽  
Islamic Banks ◽  
Conventional Banks ◽  
The Global Financial Crisis ◽  
The Impact

scholarly journals COMPARATIVE ANALYSIS OF BANK STABILITY IN INDONESIA: A NON-PARAMETRIC APPROACH ON DIFFERENT BANKING MODELS

2018 ◽  
Vol 3 (2) ◽  
Author(s):  
Norzitah Abdul Karim ◽  
Syed Musa Syed Jaafar Alhabshi ◽  
Salina Kassim ◽  
Razali Haron
Keyword(s):  
Financial Crisis ◽  
Financial Intermediation ◽  
Global Financial Crisis ◽  
Islamic Banks ◽  
Sample Period ◽  
Bank Stability ◽  
Conventional Banks ◽  
The Global Financial Crisis ◽  
The Impact ◽  
Non Parametric

The present study, grounded in theory of financial intermediation, provides new empirical evidence on comparison of bank stability measures of Islamic banks, conventional banks and other bank models in Indonesia. Specifically, 72 conventional banks, 4 Islamic banks, 3 conventional banks with Islamic subsidiaries and 2 subsidiary Islamic banks in Indonesia are considered, focusing on the sample period of 1999-2015. The study adopts z-score as a measure of bank stability, while a non-parametric multiple comparison analysis was used to test the significance of the differences in the bank stability of the different bank models, namely Islamic banks, conventional banks, Subsidiary Islamic banks and conventional banks with Islamic subsidiaries. The sample period is further divided into three sub-periods, namely, before the global financial crisis (1999-2006), during the global financial crisis (2007-2009) and after the global financial crisis (2010-2015) so as to gain more detail findings on the impact of the global financial crisis on the banks’ stability. The impact of local crisis periods (1999-2001) on bank stability of different bank models is also investigated. Findings of this study contribute towards extending the theory of financial intermediation through empirical works of stability of different banking models namely Islamic banks, conventional banks, Subsidiary banks and conventional banks with Islamic subsidiaries.

scholarly journals Effects of the Global Financial Crisis on the Agency Cost of Islamic Banks and Conventional Banks

2017 ◽  
Vol 4 (1) ◽  
pp. 44
Author(s):  
Talla M Aldeehani
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Gulf Cooperation Council ◽  
Agency Cost ◽  
Islamic Banks ◽  
Empirical Testing ◽  
Before And After ◽  
The Status ◽  
Conventional Banks ◽  
The Global Financial Crisis

In this paper, we investigate the effect of the 2008 global financial crisis on the agency cost (AC) of Islamic banks (IBs) and conventional banks (CBs). Many pioneering scholars (see, for example, Archer et al., 1998) have recognized fundamental differences in the capital structures and risks of IBs compared to CBs and called for more empirical testing of these issues. This effort is in response to those calls. Focusing on AC, we collected data for all Gulf Cooperation Council (GCC) banks satisfying the period from 2001-2014. The data was split into “before” and “after” the 2008 crisis. Although statistically insignificant, the analysis shows higher AC for IB compared to CBs before and after the crisis. However, we provide evidence of significant differences in AC causal models for the two types of banks. For conventional banks, only profitability factors explain variability in AC before and after the crisis. For Islamic banks, however, in addition to profitability, liquidity, deposits and financing facilities matter depending on the status of the economy. We provide further discussions, implications, and recommendations.

scholarly journals Alternative measures for predicting financial distress in the case of Malaysian Islamic banks: assessing the impact of global financial crisis

2020 ◽  
Vol 11 (9) ◽  
pp. 1827-1845
Author(s):  
Mehmet Asutay ◽  
Jaizah Othman
Keyword(s):  
Financial Crisis ◽  
Financial Distress ◽  
Global Financial Crisis ◽  
Islamic Banks ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Explanatory Variables ◽  
Alternative Funding ◽  
The Global Financial Crisis ◽  
The Impact

Purpose The global financial crisis of 2008 still has an impact on the financial systems around the world, for which funding liquidity has been mentioned as one of the main concerns during that period. This study aims to consider the impact of and extent to which the funding structure of Islamic banks along with deposit structure, macroeconomic variables, other bank-specific variables, including alternative funding mix variables (in terms of funding structure measured as financing/deposit ratio), could play a part in explaining the financial conditions and predicting the failures and performances of Islamic banks in the case of Malaysia under the distress created by the global financial crisis. Design/methodology/approach Multivariate logit model was used with a sample including 17 full-fledged Islamic banks in Malaysia for the period from December 2005 to September 2010 by using quarterly data. Findings This study found that the funding mix variable (financing/deposit ratio), the composition of deposits, alternative bank-specific variables and alternative funding mix variables are statistically significant. In contrast, none of the macroeconomic variables is found to have a significant impact on bank liquidity. In the final models, the variables that showed significant performance were selected as explanatory variables. The results of McFadden R-squared for both selected models showed an excellent fit to predict the Islamic banks’ performance. Originality/value This empirical study contributes to the literature in two ways: to the best of the authors’ knowledge, this is the first study to examine the role of the funding structures of Islamic banks in determining their performance; and it also examines the effect of deposit composition (the mudharabah and non-mudharabah deposits) on Islamic banks’ performance.

scholarly journals Financial System Stability in Indonesia during The Global Financial Crisis 2007/2008: Conventional vis-à-vis Islamic

2015 ◽  
Vol 2 (2) ◽  
pp. 136
Author(s):  
Muh. Rudi Nugroho ◽  
Ibnu Qizam
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Internal Variable ◽  
Islamic Banks ◽  
Z Score ◽  
Internal Factors ◽  
Macroeconomic Factors ◽  
Conventional Banks ◽  
The Global Financial Crisis

This research aims to analyze the financial stability especially in dual banking system in Indonesia and discusses the role of Islamic banks in the financial stability of national banks. In addition, this study also focuses on the analysis of the determinants of financial stability namely on the national banking Industry. This research uses panel data in which combined data between time series and cross section with an observation periods are 2005:1 - 2009:1 by using an internal variable of banks and macroeconomic data. Z-score analysis will be used as main tool analysis regressed with internal variable. Empirical results obtained from this research shows that during the period of 2005:1 - 2009:1 banking financial stability, for both conventional and Islamic and categorized based on an asset scale, the movement of the Z-score value is different. From the Z-score values analysis shows that Islamic banks are the most stable bank with a trend increased sharply when compared with other banks, namely conventional couterparts. If viewed from each category, small conventional banks more stable than small Islamic banks, and there are declining trend in 2005:1 to 2009:1. Whereas for large and middle conventional banks the trend of the Z-score movement are in the same patterns. This study also founds that the determinant of the banking stability can be seen from two sides namely bank's internal factors and macroeconomic factors. Internal factors consist of: Income Diversity (ID), Credit or Financing (Loan), Total Assets (TA), Operational Cost (Cost), Cost Income (CI), Loan Asset (LA), Current Liability (CL), Cash to Current Liabilities (CCL), Capital Bank (MDL). While macroeconomic factors consist of: inflation, BI Rate, Exchange Rate, Composite Index (JCI), the Gross Domestic Product (GDP). This research also examined the extent to which the role of Islamic banks and the global financial crisis to the financial stability of national banking. This analysis shows that the global financial crisis and Islamic banks affect significantly to the financial stability of banking industries in Indonesia.

scholarly journals The Impact of the Global Financial Crisis on Profitability of the Banking Industry: A Comparative Analysis

Economies ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 66 ◽  
Author(s):  
G. Erfani ◽  
Bijan Vasigh
Keyword(s):  
Financial Crisis ◽  
Commercial Banks ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Seemingly Unrelated Regression ◽  
Islamic Banks ◽  
Islamic Tradition ◽  
Score Model ◽  
The Global Financial Crisis ◽  
The Impact

In this paper, the effects of the recent global financial crisis on efficiency and profitability of financial institutions were analyzed. In a comparative study, the impacts of the global financial crisis on the performance of Islamic and commercial banks were examined. The fundamental difference between Islamic and conventional banking is that Islamic banking is founded upon the ethical principles of Islamic tradition and law (Sharia). By utilizing a sample of eight Islamic banks and eleven commercial banks, the impact of the global financial crisis on efficiency and profitability of the banking sector was evaluated. This study covered the period from 2006 to 2013. The results of this research were obtained from the Altman Z-score model, ratio analysis, the data envelopment analysis (DEA) method, and the seemingly unrelated regression (SUR) model. The results show that during the study period, Islamic banks (IBs) managed to maintain their efficiency while most commercial banks (CBs) suffered a loss in their efficiency. Furthermore, this study found that the financial crisis did not have a significant impact on the profitability of Islamic banks.

How crisis-proof is Islamic finance?

2018 ◽  
Vol 10 (4) ◽  
pp. 415-426 ◽  
Author(s):  
Hasnan Baber
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Global Financial Crisis ◽  
Islamic Finance ◽  
Islamic Banks ◽  
Actual Performance ◽  
Content Type ◽  
Current Financial Crisis ◽  
Conventional Banks ◽  
The Global Financial Crisis

PurposeThis paper aims to explore Islamic finance’s resilience in times of financial crisis and considers Islamic finance’s viability as an alternative to the current financial system.Design/methodology/approachEstablished on a review of theoretical aspects underlying the notion of Islamic finance being proficient of reducing the harshness of financial crises and a latent solution to financial volatility, this paper assesses actual performance of Islamic and conventional banks during and in the repercussion of the current financial crisis. Interviews were also conducted with managers of Islamic banks.FindingsThe paper concludes that performance of Islamic banks during the global financial crisis is found to be supportive of their argued resilience and consistency. However, the latest financial crisis has brought to light a number of theoretical and realistic issues that challenge Islamic finance and its absorbing capacity against financial crises.Originality/valueThe paper is an original work which suggests about moderating risks and proposing various ways in which the Islamic finance can be made more stable and resilient.

Comparing the competition of Malaysia Islamic and conventional banks

2017 ◽  
Vol 8 (1) ◽  
pp. 23-40 ◽  
Author(s):  
Muhamad Azhari Wahid
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Robust Regression ◽  
Global Financial Crisis ◽  
Positive Impact ◽  
Ordinary Least Squares ◽  
Islamic Banks ◽  
Content Type ◽  
Conventional Banks ◽  
The Impact

Purpose This study aims to analyse three main questions within the Malaysian banking system: Are Islamic banks more competitive than conventional banks? What are the levels of competition for Islamic and conventional banking sectors pre, during and post the 2007-2009 global financial crisis? Does penetration of Islamic banks affect the competitive structure of conventional banks? Design/methodology/approach In measuring a bank competition, the author estimates the Panzar–Rosse H-statistic (PRH) method on 17 Islamic and 21 conventional banks in Malaysia over the period of 2004-2013. This is then followed by ordinary least squares (OLS) robust regression analysis to control Islamic banks’ penetration, bank-specific and macroeconomic factors. Findings Results from the PRH method (total revenue) suggest that Malaysian Islamic banks are relatively more competitive than their conventional counterparts. Furthermore, the author observes that the level of competition for both Malaysian Islamic and conventional banks increased tremendously during the 2007-2009 global financial crisis. This suggests the impact of the crisis on the level of competition for both banking systems. Finally, the OLS robust regression suggests that Islamic banks’ penetration has a significantly positive impact on the level of competition for conventional banks. The PRH estimation using total interest income indicates similar results, suggesting the robustness of these results. Practical implications This study reveals whether Islamic banks’ penetration is able to increase the level of competition within the conventional banking sector. Knowledge on this is important to the policymaker. Originality/value To the best of the author’s knowledge, this is the first study using the PRH method in comparing the level of competition for Malaysian Islamic and conventional banks. Furthermore, this is the first study analysing the impact of Malaysian Islamic banks’ penetration on the level of competition for conventional banks.

scholarly journals IMPACT OF THE GLOBAL CRISIS ON THE GOVERNANCE STRUCTURES OF INTERNATIONAL FINANCIAL INSTITUTIONS

2011 ◽  
Vol 1 (2) ◽  
pp. 1-12
Author(s):  
Gökhan Özkan
Keyword(s):  
Developing Countries ◽  
Financial Crisis ◽  
Financial Institutions ◽  
Global Financial Crisis ◽  
Governance Structures ◽  
International Financial Institutions ◽  
Global Crisis ◽  
Structural Problems ◽  
The Global Financial Crisis ◽  
The Impact

The global financial crisis dragged many countries into recession, demonstrated that the internationalfinancial system has structural problems and started discussions about restructuring of the international financialinstitutions. The main objective of this paper is to investigate the impact of the global financial crisis on thegovernance structures of the international financial institutions. To this end, studies made at different internationalplatforms were evaluated. The debates and negotiations among the developed and developing countries aboutgovernance structures of the international financial institutions were analyzed. Developing countries’ demand toreform the decision-making mechanisms of the Bretton Woods institutions, the IMF and the World Bank anddeveloped countries’ reservations were investigated. It was concluded that the new shape of the internationalfinancial architecture and governance structures of international financial institutions will depend on internationalpolitics as well as the evolution of the global crisis and the economic dynamics.

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