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New insights into bank asset securitization: The impact of religiosity

Omneya Abdelsalam, Marwa Elnahass, Jonathan Batten and Sabur Mollah

Journal of Financial Stability, 2021, vol. 54, issue C

Abstract: We examine the influence of both organizational and geographical religiosity, as important ethical parameters moderating a bank’s decision to securitize their assets. The study employs a unique database of banks located within countries marked by high (low) religious adherence. Our results provide evidence that different measures of religiosity affect a bank’s decision to securitize their assets: Banks located in countries with high religious adherence are less likely to engage with securitization compared to banks in countries with lower religiosity, while Islamic banks have a higher likelihood of embarking on a highly monitored model of asset securitization in contrast to conventional banks. When examining the motives underlying a bank’s decision to securitize assets, there is strong evidence that Islamic banks securitize their assets to improve their portfolio diversification, financial performance, and regulatory compliance. This study highlights the importance of considering informal ethical mechanisms, such as religiosity, at both the country and firm levels, when studying bank risk-taking and trading decisions, especially in countries with dual banking systems.

Keywords: Bank asset securitization; Geographical religiosity; Organizational religiosity; Islamic banks; Bank risk (search for similar items in EconPapers)
JEL-codes: C23 G01 G21 G28 L50 M41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1016/j.jfs.2021.100854

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