How profitability differs between conventional and Islamic banks: A dynamic panel data approach
Halit Yanıkkaya (),
Nihat Gumus and
Yasar Ugur Pabuccu
Pacific-Basin Finance Journal, 2018, vol. 48, issue C, 99-111
This paper analyzes and compares the dynamics for the profitability of conventional banks and Islamic banks in the Organization of Islamic Cooperation countries and the United Kingdom between 2007 and 2013 using a sample of 74 Islamic and 354 conventional commercial banks. “Net interest margin” and “return on asset” are employed as variables representing the profitability and several new explanatory variables are introduced such as, the usage of self-service banking channels, penetration of financial services, crude oil/agriculture price indexes and asset ratio of non-Murabahah assets of Islamic Banking. Dynamic panel data estimates indicate that almost all explanatory variables of profitability for conventional and Islamic banks are different implying that profitability of Islamic banks relies on the different dynamics than that of conventional ones. Both profitability measures are not persistent over time and neither of them has significant relationship with the country specific macroeconomic variables. Estimation results imply the importance of new product and alternative channel development in enhancing the profitability of Islamic banks. Moreover, our analysis shows that the usage of products which promotes more risk sharing as compared to the products based on Murabahah structure can contribute to the performance of Islamic banks.
Keywords: Net interest margin; Return on asset; Islamic banking; Banking profitability (search for similar items in EconPapers)
JEL-codes: E44 G21 Z12 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:48:y:2018:i:c:p:99-111
Access Statistics for this article
Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee
More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().