Determinants of Banking Crises in ASEAN Countries

Norfaizah Othman (), Mariani Abdul-Majid and Aisyah Abdul-Rahman
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Norfaizah Othman: Department of Economics, Faculty Management & Muamalah, Selangor International Islamic University Malaysia (KUIS), 43000 Bandar Seri Putra, Bangi, Malaysia
Aisyah Abdul-Rahman: #x2020;Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia

Journal of International Commerce, Economics and Policy (JICEP), 2018, vol. 09, issue 03, 1-20

Abstract: This paper attempts to estimate the determinants of crises on Islamic banking system during financial crises using early warning system (EWS) with particular focus on the element of profit–loss sharing. Profit–loss sharing has significant impact in reducing crisis probability experienced by the Islamic banking system. This suggests that profit–loss sharing may be considered as one of the risk mitigation techniques for bank to remain resilient during the crises. The results further show that full-fledged Islamic banks have higher chances of experiencing crises relative to the Islamic subsidiaries banks. In addition, economic freedom and overvaluation in the currency are more likely exposed to banks to the crises.

Keywords: Financial crisis; Early Warning System; logit model; Islamic banks (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1142/S1793993318500096

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