 Do we need bigger Islamic banks? An assessment of bank stabilityMansor Ibrahim and Syed Aun R. Rizvi Journal of Multinational Financial Management, 2017, vol. 40, issue C, 77-91 Abstract: In this paper, we evaluate from the stability point of view whether Islamic banks should stay small or should be bigger. More specifically, in relating bank stability to bank size, we examine potential non-linear effects of size on bank soundness and the roles regulation plays in strengthening or weakening the size-stability relation using a panel sample of 45 Islamic banks from 13 countries. Our results show that larger Islamic banks are more stable, at least when they surpass a certain threshold size. As regards regulation, activity restrictions and capital stringency play a role in strengthening the stability-size relation. By contrast, the positive stability-size relation is weakened with more private monitoring and supervisory power. Hence, our results point to the benefits of having bigger Islamic banks. They also suggest that, to further enhance the stability implications of larger Islamic banks, policymakers should focus on improving regulation in the forms of activity restrictions and capital stringency. Keywords: Islamic banking stability; Bank size; System GMM; LSDVC; Regulation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:40:y:2017:i:c:p:77-91 DOI: 10.1016/j.mulfin.2017.05.002 Access Statistics for this article Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth More articles in Journal of Multinational Financial Management from Elsevier |
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