Islamic banks' income structure and risk: evidence from GCC countries

Rihab Grassa

Accounting Research Journal, 2012, vol. 25, issue 3, 227-241

Abstract: Purpose - The purpose of this paper is to analyze the income structure of Islamic banks in the Gulf Cooperation Council (GCC) countries and to explore the effect of the diversification of banks' earning on risks that may harm these latter. Design/methodology/approach - Using data from 2002‐2008 for 42 Islamic banks, this article provides descriptive and analytical analysis and multiple regression equations. Findings - This article reveals that greater reliance on the income share of the profit‐loss‐sharing products is associated with higher risk and higher insolvency risk for both listed Islamic banks and non‐listed Islamic banks. However, no effect has been observed between the operation income of non‐profit‐losses‐sharing products and risk levels. That is why listed banks prefer to invest less in non‐profit‐loss‐sharing products than in profit‐loss‐sharing products. Research limitations/implications - Financial regulators in emerging Islamic financial market should help Islamic banks to find equilibrium between the expansion of the Islamic financial market and respect for theraison d'êtreof Islamic finance: the profit and loss sharing mechanisms. Originality/value - To the best of the author's knowledge, this is the first article that empirically tests why Islamic banks prefer to invest less in profit‐loss‐sharing products. Also, this article contributes to studying the relationship between Islamic finance and risk.

Keywords: Saudi Arabia; Kuwait; United Arab Emirates; Qatar; Bahrain; Islam; Banks; Islamic banks; Risk management; Performance; Profit‐loss‐sharing products (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:v:25:y:2012:i:3:p:227-241

DOI: 10.1108/10309611211290185

Access Statistics for this article

Accounting Research Journal is currently edited by Professor Reza Monem

More articles in Accounting Research Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().