Funding liquidity risk and banks' risk-taking: Evidence from Islamic and conventional banks

Houcem Smaoui, Karim Mimouni, Héla Miniaoui and Akram Temimi
Authors registered in the RePEc Author Service: Hela Miniaoui and Hela Miniaoui

Pacific-Basin Finance Journal, 2020, vol. 64, issue C

Abstract: The purpose of this paper is to investigate the impact of funding liquidity risk on the risk-taking behaviour of Islamic and conventional banks. Using bank-level and country-level data from 18 countries over the period 2004–2016, we show that lower funding liquidity risk leads to higher risk-taking behaviour by banks, with this effect being less pronounced for Islamic banks. Additionally, large banks tend to engage in less risk-taking when faced with lower funding liquidity risk. Moreover, the evidence shows that, unexpectedly, banks faced with lower funding liquidity risk were more inclined to take risks during the 2008 global financial crisis.

Keywords: Funding liquidity risk; Bank risk-taking: Islamic banking (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:64:y:2020:i:c:s0927538x20302304

DOI: 10.1016/j.pacfin.2020.101436

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