Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks?

Jabir Esmaeil, Husam Rjoub and Wing-Keung Wong
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Jabir Esmaeil: Department of Banking and Finance, Faculty of Economics and Administrative Sciences, Cyprus International University, Mersin 10, Haspolat 99040, Cyprus

Energies, 2020, vol. 13, issue 12, 1-16

Abstract: The main aim of this study is to empirically examine and compares the impacts of oil price shocks, Arab revolutions, some macroeconomics, and bank-specific variables on bank profitability indicators between Conventional and Islamic banks in Gulf Cooperation Council (GCC) countries. The study employed panel Autoregressive-Distributed Lag (ARDL) techniques to examine the causal relationship both at the short and long-run. Our results reveal that most of the variables employed in our study significantly influence Return on Asset (ROA), Return on Equity (ROE), and Net Interest Margin (NIM)/ Net Profit Margin (NPM) for both Conventional Banks (CBs) and Islamic Banks (IBs) similarly in the long run. Findings from our study imply that both CBs and IBs have some similar features in nature, which could be because of the structure of the policies for IBs is in line with the regulatory framework for the CBs. The main finding from the study is the significance of oil price shock and the Arab springs that are more pronounced in CBs than IBs. Also, it can be seen that a sustainable profit of IBs is higher than CBs due to the adjustment speed of IBs to equilibrium in the presence of shock is found to be higher than CBs. Hence, our study suggests that oil price shock could be utilized for having a prudent macro regulation for the banks in GCC countries. Our findings are useful to Government officers, bankers, investors, and researchers for their decision making by estimating future trends of the profitability for both Conventional and Islamic banks in the GCC countries.

Keywords: sustainability; bank profitability; conventional and islamic banks; panel ARDL; GCC countries (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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