The unique risk exposures of Islamic banks’ capital buffers: A dynamic panel data analysis

Hassan Daher, Abul Masih and Mansor Ibrahim

Journal of International Financial Markets, Institutions and Money, 2015, vol. 36, issue C, 36-52

Abstract: The growing relevance of Islamic banking from a prudential perspective warrants the need to investigate the susceptibilities of Islamic banks’ capital buffers to unique risks emanating from their operating environments. We employ a panel model using two-step dynamic Generalized Method of Moments (GMM) on a data set comprising 128 conventional and Islamic banks. Our results tend to indicate privately owned Islamic banks, unlike their state owned counterparts, attempt to safeguard shareholders by independently mitigating the effects of displaced commercial risk through higher capital buffers. The relation between equity investment risk and bank capital buffers also seems to vary by region.

Keywords: Islamic banks; Capital buffers; Risk management; Bank regulation; Capital adequacy (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:36:y:2015:i:c:p:36-52

DOI: 10.1016/j.intfin.2015.02.012

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