FINANCIAL STABILITY OF ISLAMIC AND CONVENTIONAL BANKS IN BANGLADESH: REVISITING STABILITY MEASURES AND ANALYZING STABILITY BEHAVIOR

Md Enayet Hossain () and Mahmood Osman Imam ()
Additional contact information
Md Enayet Hossain: Credence Asset Management Limited
Mahmood Osman Imam: University of Dhaka

Journal of Islamic Monetary Economics and Finance, 2018, vol. 3, issue 2, 293-314

Abstract: This study intends to assess the relative financial stability of Islamic banks in Bangladesh using three different Z-Scores as financial stability measures, based on a sample of 29 listed commercial banks (23 conventional and 6 Islamic) in Bangladesh over the period 2005-2016. Apart from the existing measure of financial stability, Z-Score, the paper contributes to the literature by developing an alternative Z-Score based on bank’s loan portfolio infection ratio. We first use pair-wise comparison and find that Islamic banks are financially more stable in two stability measures i.e. Z-Score (based on Capital Adequacy Ratio) and Z-Score (based on Infection Ratio). We then perform static (random effects) and dynamic (GMM) panel data analysis. By controlling for bank-specific, industry-specific and macroeconomic variables in the regressions, we find that Islamic banks are financially more stable in 2 panel regressions of Z-Score (based on Infection Ratio). We also find that the presence of Islamic banks increases the stability of all banks in the system including their conventional peers.

Keywords: Financial Stability; Financial Stability Measures; Z Scores; Z Scores based on CAR; Z Scores based on IR; Islamic Banking (search for similar items in EconPapers)
JEL-codes: G20 G21 O43 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://jimf-bi.org/index.php/JIMF/article/view/893/702 (application/pdf)

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:idn:jimfjn:v:3:y:2018:i:2f:p:293-314

DOI: 10.21098/jimf.v3i2.893

Access Statistics for this article

Journal of Islamic Monetary Economics and Finance is currently edited by Dr. Ali Sakti

More articles in Journal of Islamic Monetary Economics and Finance from Bank Indonesia Contact information at EDIRC.
Bibliographic data for series maintained by Lutzardo Tobing ( this e-mail address is bad, please contact ) and Jimmy Kathon ().