Measurement and Comparison of the Financial Soundness of Conventional and Islamic Commercial Banks in Bangladesh using the Altman’s Z Score Model

Shohel Rana and Professor Dr. A.S.M. Kamruzzaman
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Shohel Rana: Associate Professor, Dept. of Finance and Banking, Jatiya Kabi Kazi Nazrul Islam University, Trishal, Mymensingh, Bangladesh & PhD Fellow, Department of Finance, University of Rajshahi, Rajshahi, Bangladesh.
Professor Dr. A.S.M. Kamruzzaman: Dept. of Finance, University of Rajshahi, Rajshahi, Bangladesh.

International Journal of Science and Business, 2021, vol. 5, issue 12, 52-62

Abstract: The prime objective of the paper is to measure and compare the financial soundness of conventional and Islamic commercial banks in Bangladesh and to suggest ways to improve the financial status of both categories of banks. Altman’s z-Score model is used to measure and predict the financial soundness of selected banks while an independent sample t-test is also used to measure the gap in financial soundness between conventional and Islamic commercial banks. This study uses secondary data and covers ten years study period of 2010-2019. The major finding of the study is that all conventional and Islamic commercial banks are in safe zone during the study period. Only First security Islamic bank ltd. was in the gray zone in 2010 but successfully recovered in the later period. This study also finds that conventional commercial banks are better in terms of financial health than Islamic commercial banks but this difference in financial soundness is not statistically significant.

Keywords: Financial soundness; conventional and Islamic commercial banks; Altman Z-score; Independent t-test (search for similar items in EconPapers)
Date: 2021
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