Impact of Global Financial Crisis on Islamic Banks of Pakistan

Muhammad Daniyal, Hafizullah Rahimi and Hafiza Ayesha Iftikhar

Audit and Accounting Review, 2022, vol. 2, issue 1, 46-87

Abstract: This study aims to analyze the financial performance of Islamic banks, which remains a widely discussed topic after the latter’s development. Literature review suggests that Islamic banks outperformed conventional banks during the global financial crisis of 2008. The collected data supports the premise that the crisis of 2008 had no impact on Islamic banks. This empirical study tests this hypothesis and compares the ratios and stock prices between pre, During and post crisis time period of full-fledged Islamic banks operating in Pakistan by conducting ratio analysis. It includes three study periods namely pre-crisis (2006), during crisis (2007-2009), and post-crisis (2010-2020). The findings states that the ratios and stock prices remain unchanged during the crisis. Through the application of Univariate Analysis of Variance (UAV), this study asserts that the asset turnover ratios of banks and stock return remained unaffected by the crisis. In contrast, Islamic banks profitability, efficiency, risk management, liquidity, asset quality, and Earning per share ratios were extensively affected by the said crisis.

Keywords: full-fledge Islamic banks; global financial crisis; Islamic banks; Pakistan; ratio analysis (search for similar items in EconPapers)
Date: 2022
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