The risk of political instability and the performance of Islamic banks: does corruption matter?

Zuhairan Yunan, Majed Alharthi and Saeed Sazzad Jeris

Journal of Financial Crime, 2023, vol. 31, issue 6, 1384-1406

Abstract: Purpose - This study aims to investigate the relationship between political instability and the performance of Islamic banks in emerging countries. Design/methodology/approach - For a data sample of 93 Islamic banks in 20 emerging countries during the period from 2011 to 2016, the authors identify indicators that matter most for the activities of Islamic banks. Findings - The study finds that a stable government and law and order are positively correlated with the health of Islamic financial institutions. On the other hand, corruption and military involvement in politics can create an unstable environment for businesses, leading to uncertainty and risk. The study also reveals that Islamic banks operating in regions or communities with lower risk of socio-economic conditions tend to exhibit higher levels of profitability. Originality/value - Overall, the study provides valuable insights into the impact of political instability on Islamic banks in emerging countries.

Keywords: Political risk; Islamic banks; Emerging countries; Profitability; Stability; Soundness; C33; D73; F40; G21 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-09-2023-0229

DOI: 10.1108/JFC-09-2023-0229

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