Heterogeneous Market Structure and Systemic Risk: Evidence from Dual Banking Systems

Pejman Abedifar (pa31@st-andrews.ac.uk), Paolo Giudici and Shatha Hashem (shatha.hashem01@universitadipavia.it)
Additional contact information
Pejman Abedifar: School of Management, University of St Andrews
Shatha Hashem: University of Pavia

No 134, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: This paper investigates how banking system stability is affected when we combine Islamic and conventional finance under the same roof. We compare systemic resilience of three types of banks in 6 GCC countries with dual banking systems: fully-fledged Islamic banks (IB), purely conventional banks (CB) and conventional banks with Islamic windows (CBw). We employ market-based systemic risk measures such as MES, SRISK and DeltaCoVaR to identify which sector is more vulnerable to a systemic event, and use graphical network models to determine the banking sector that can more easily spread a systemic shock to the whole system. Using a sample of 2,608 observations on 79 publicly traded banks operating over the 2005-2014 period, we find that CBw is the least resilient sector to a systemic event and is more interconnected with other banks during crisis times.

Keywords: graphical network models; Islamic banking; partial correlations; systemic risk measures (search for similar items in EconPapers)
JEL-codes: C58 G21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2017-02
New Economics Papers: this item is included in nep-cfn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Journal Article: Heterogeneous market structure and systemic risk: Evidence from dual banking systems (2017)
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