Determinants of profitability of takaful operators: new evidence from Malaysia based on dynamic GMM approach

Arif Hodori and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: Takaful or Islamic Insurance is a branch of Islamic Finance that is frequently overlooked, with a very few empirical studies done in the field. In Malaysia, Takaful’s asset base had grown from just RM$1.4 million in 1986 to RM$23 billion in 2014. Despite this significant growth, there has been very few empirical studies done in the field, especially on the determinants of Takaful operators’ profitability. Motivated by this, this paper aims to investigate the determinants of profitability of Takaful operators by using the dynamic GMM estimator. This study finds that Takaful operators’ size and age are significant determinants of its profitability. However, there are various limitations and challenges that this paper faced, especially on data availability which forced us to resort to manually extracting the data from the financial statements of the companies from their websites at a heavy cost of time and effort. This indicates the attention, work and effort that researchers in the field of Islamic Finance should give to this relatively unexplored field as deeper understanding of this field is crucial for supporting its growth and innovation.

Keywords: Islamic insurance; profitability; Malaysia; dynamic GMM (search for similar items in EconPapers)
JEL-codes: C58 E44 G15 (search for similar items in EconPapers)
Date: 2017-05-10
New Economics Papers: this item is included in nep-dcm, nep-mac and nep-sea
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