A comparison of leverage and profitability between Islamic and conventional banks

Kaouther Toumi (), Jean-Laurent Viviani () and Lotfi Belkacem
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Kaouther Toumi: LGCO - Laboratoire Gouvernance et Contrôle Organisationnel - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse
Jean-Laurent Viviani: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Lotfi Belkacem: IHES - Institute of Higher Commercial Studies of Sousse - Université de Sousse, Université de Sousse

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Abstract: The aim of our research is to determine whether Islamic and conventional banks are distinguishable from one another on the basis of financial characteristics, in particular, we consider leverage and profitability ratios. Our sample is made of Islamic and conventional banks, resulting in a panel of 545 observations (250 for Islamic banks) from 18 countries over the period 2004-2008. We run binary logistic regressions and discriminant analysis on leverage and profitability ratios and their related determinants. Globally, Islamic banks are observed to rely more heavily on their equity in financing assets than conventional banks. This difference in capital structure can be explained by the difference in size and dividend policy. Furthermore, profitability ratios are not significant according to binary regression and are not good discriminators between Islamic and conventional banks.

Keywords: Profitability; Equity; Capital structure; Descriminant analysis; Binary regression (search for similar items in EconPapers)
Date: 2011-05-12
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Published in M. Bellalah, O. Masood, J-L. Prigent (Ed). Financial Crisis and Governance, Cambridge Scholars Publishing, pp.856-867, 2011

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03608589

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