How does oil price uncertainty affect the stability of conventional and Islamic banks in major oil-exporting countries? Evidence from the GCC region

Mohammad Alsharif

Finance Research Letters, 2024, vol. 69, issue PA

Abstract: This study investigates whether oil price uncertainty has different effects on the default risk of Islamic and conventional banks in major oil-exporting countries. Using a dataset of 61 banks from the Gulf Cooperation Council (GCC) countries, we examine the impact of the Oil Price Uncertainty Index (OPUI), a new forward-looking text-based uncertainty measure created by Abiad and Qureshi (2023). The results suggest that conventional banks are more vulnerable to higher oil price uncertainty, while this relationship does not exist for banks that adhere to Islamic finance principles. This provides an opportunity for investors to hedge against the region's systemic risk.

Keywords: Bank stability; GCC banks; Islamic banks; Oil price uncertainty; GMM; LSDVC (search for similar items in EconPapers)
JEL-codes: C30 C36 G21 Z12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:69:y:2024:i:pa:s1544612324011905

DOI: 10.1016/j.frl.2024.106161

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