EconPapers    
Economics at your fingertips  
 

Exposure to interbank investment and financing risk by Islamic banks: a dynamic panel analysis of Malaysia

Mohammad Taqiuddin Mohamad, Ahmad Azam Sulaiman and Meguellati Achour ()

International Journal of Islamic and Middle Eastern Finance and Management, 2020, vol. 14, issue 1, 1-15

Abstract: Purpose - The Government of Malaysia has developed an Islamic Interbank Money Market since January 1994 with the objective to facilitate funding for the Islamic banking sector in the country. This platform also enables Islamic banks to obtain Shari?ah-compliant funds from other Islamic banks. This study aims to examine the effects of interbank investment and financing risk on the financing decisions of Malaysia’s Islamic banks between 1994 and 2015. The financing decisions are used as financing measures to determine the effect of investing in the interbank market and financing risk indicators on financing. Design/methodology/approach - The descriptive, correlation and dynamic panel analysis results are derived with the help of LIMDEP 9.0 software. Findings - The study found a negative relationship between the interbank investment variable with the financing decisions of Islamic banks. This reflects that an increase in interbank investment leads Islamic banks to reduce their level of financing. These findings prove that the investment activities between Islamic banks had a “substitution effect” and decreased their capability of financing because of their tendency to maintain liquidity. Originality/value - Islamic banks are confident that they will generate higher profits in the coming financial year. The economic conditions of Malaysia do not influence Islamic banks’ financing decisions, whereas Islamic banks in this study are more dependent on the balance sheet indicators.

Keywords: Islamic banks; Financing decision; Financing risk; Interbank investment (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.emeraldinsight.com/10.1108/IMEFM-11-201 ... RePEc&WT.mc_id=RePEc (text/html)
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:imefpp:imefm-11-2017-0289

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://emeraldgroupp ... ournals.htm?id=imefm

Access Statistics for this article

International Journal of Islamic and Middle Eastern Finance and Management is currently edited by Dr Kabir Hassan

More articles in International Journal of Islamic and Middle Eastern Finance and Management from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().

 
Page updated 2022-06-20
Handle: RePEc:eme:imefpp:imefm-11-2017-0289