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The impact of Sukuk on the performance of conventional and Islamic banks

Karim Mimouni, Houcem Smaoui, Akram Temimi and Al-Azzam, Moh'd

Pacific-Basin Finance Journal, 2019, vol. 54, issue C, 42-54

Abstract: This paper examines the impact of Sukuk market development on banks' profitability using a dataset of 71 Islamic banks (IBs) and 146 conventional banks (CBs) spanning 13 countries over the 2003–2014 period. Using a dynamic panel model, we find that the overall bank profitability is negatively impacted by Sukuk market development. However, when we control for whether the bank is Islamic or conventional, important findings emerge. The results suggest that Sukuk development reduces IBs' profitability but has no impact on CBs' performance. In addition, the evidence shows that these adverse effects on IBs' profitability are substantially lower after the 2008 global financial crisis. Accordingly, our findings suggest that IBs were able to overcome Sukuk competition after the crisis.

Keywords: Sukuk; Bank performance; GMM estimation; Financial crisis (search for similar items in EconPapers)
JEL-codes: C33 G10 G21 G29 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:pacfin:v:54:y:2019:i:c:p:42-54