 Liquidity risk in the Saudi banking system: Is there any Islamic banking specificity?Jamel Boukhatem and Mouldi Djelassi The Quarterly Review of Economics and Finance, 2020, vol. 77, issue C, 206-219 Abstract: This paper examines the liquidity risk of Islamic and conventional banks (referred to as IBs and CBs, respectively) by looking at the impact of bank-specific variables on three complementary liquidity risk measures in the Saudi banking system, in which both types of banks operate. Applying the least squares dummy variable corrected (LSDVC) approach over the period from the first quarter of 2008 to the second quarter of 2018, our analysis suggests that the liquidity risk indicators for IBs have been affected in a different way to those of CBs: (i) Using the financing-to-deposits indicator, larger IBs typically have on average a narrower funding gap than smaller ones. The largest CBs, meanwhile, have more vulnerable funding structures than the largest IBs. Islamic and CBs that are more oriented toward traditional intermediation activities have a wider funding gap. (ii) In terms of the interbank ratio indicator, IBs with stronger capital may need to rely more on interbank funding and may be more likely to be net borrowers than the less-capitalized IBs. CBs that can secure more net interest income tend to have better liquidity positions than IBs. (iii) In terms of the liquidity-ratio indicator, IBs with stronger capital tend to hold less liquid assets as a proportion of their short-term liabilities than smaller ones. Moreover, we show an opposing behavior for the two types of banks for capital ratio and ROA. If CBs are better capitalized and realizing more revenue on assets, they tend to have a greater liquidity ratio than IBs with the same characteristics. Keywords: Liquidity risk; Islamic banks; Conventional banks; LSDVC approach (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:77:y:2020:i:c:p:206-219 DOI: 10.1016/j.qref.2020.05.002 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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