Are Islamic Banks Sufficiently Diversified? An Empirical Analysis of Eight Islamic Banks in Malaysia

Mohamed Ali Chatti (), Akassi Kablan and Ouidad Yousf ()
Additional contact information
Mohamed Ali Chatti: Islamic Development Bank, Postal: .
Ouidad Yousf: University of Montpellier, France, Postal: .

Islamic Economic Studies, 2013, vol. 21-2, 23-54

Abstract: The aim of this study is to analyze the diversification among financial activities of Islamic banks and how it affects banks performance. We used the Herfindahl-Hirschman Index (HHI) to measure the degree of asset/liability diversification and risk-adjusted performance as criteria of assets allocation and management compensation. We found that retail and commercial activity are the most profitable activity, which lead to an overinvestment in those activities. Some banks show high average correlation between commercial and retail activities, and corporate and investment activities. The analysis of the efficiency shows that none of these banks falls on the frontier which means that they should change the structure of their portfolio in order to become less concentrated. They should also allocate more assets to treasury activity.

Keywords: Diversification; performance; Islamic banks; HHI; MPT (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.irti.org/English/Research/Documents/IES/017.pdf Full text (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:ris:isecst:0010

Access Statistics for this article

Islamic Economic Studies is currently edited by Salman Syed Ali and Anis Ben Khedher

More articles in Islamic Economic Studies from The Islamic Research and Training Institute (IRTI) Contact information at EDIRC.
Bibliographic data for series maintained by IRTI Staff () and ().