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The Nexus between Economic Freedom and Islamic Bank Performance in the MENA Banking Sectors

Fadzlan Sufian and Muhamed Zulkhibri
Authors registered in the RePEc Author Service: Muhamed Zulkhibri Abdul Majid ()

MPRA Paper from University Library of Munich, Germany

Abstract: The study examines the impact of economic freedom on Islamic banks’ performance operating in the MENA banking sectors during the period 2000-2010. We find that the larger, more diversified, and better capitalized Islamic banks relatively more profitable, while credit risk and expense preference behaviour seem to exert negative impact. The findings suggest that greater financial freedom positively influences the profitability of Islamic banks operating in the MENA banking sectors. Interestingly, the impact of monetary freedom is negative related to performance implying that higher degree of monetary policy independence reduces Islamic banks’ profitability, thus, supporting the benefits of government intervention in the development of Islamic banking system.

Keywords: Economic Freedom; Islamic Banks; Profitability; Panel Regression Analysis; MENA (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2011-02-01
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