EconPapers    
Economics at your fingertips  
 

The impact of Islamic banking model and Islamic financial development on bank performance: evidence from dual banking economies

Tanveer Ahsan and Muhammad Azeem Qureshi
Additional contact information
Tanveer Ahsan: ESC [Rennes] - ESC Rennes School of Business

Post-Print from HAL

Abstract: Purpose The purpose of this study is to develop an Islamic Banking Index representing the Islamic banking model and to investigate its impact on the performance of Islamic and conventional banks. This study also analyzes the impact of Islamic financial development on bank performance. Design/methodology/approach The authors collected the data from 23 countries for the period from 2010 to 2018 and developed a composite Islamic Banking Index. The authors applied the generalized method of moments on 3,542 bank-year observations for both Islamic and conventional banks to analyze the impact of the Islamic Banking Index on bank performance. The results of the study are robust to time-fixed effects, country-level time-varying factors and endogeneity issues. Findings The authors found that Islamic Banking Index positively contributes to the return on assets (ROAit) of Islamic banks only. This impact becomes highly significant in countries with comparatively higher Islamic financial development. This finding suggests that the Islamic financial development in a country provides a supportive operating environment to Islamic banks and increases their performance. The authors also found that Islamic Banking Index positively contributes to the return on equity (ROEit) of both types of banks. Practical implications The authors argue that moving away from interest-based products and focusing more on diversified portfolios can boost the performance of both types of banks without increasing their risk levels. Originality/value To the best of the authors' knowledge, this is the first study that develops a composite Islamic Banking Index based on differentiating factors of the Islamic banking model and investigates the impact of Islamic Banking Index and Islamic financial development on bank performance.

Keywords: Islamic banking index; Banking model; Bank-performance; Bank risk; Panel data (search for similar items in EconPapers)
Date: 2021-09-27
References: Add references at CitEc
Citations:

Published in International Journal of Islamic and Middle Eastern Finance and Management, 2021, 15 (3), pp.602-625. ⟨10.1108/IMEFM-05-2020-0248⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: The impact of Islamic banking model and Islamic financial development on bank performance: evidence from dual banking economies (2021) Downloads
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:hal:journl:hal-03697334

DOI: 10.1108/IMEFM-05-2020-0248

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).

 
Page updated 2025-03-19
Handle: RePEc:hal:journl:hal-03697334