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Panel Modeling of Z-score: Evidence from Islamic and Conventional Saudi Banks

Hassan Ghassan and Abdelkrim Guendouz

MPRA Paper from University Library of Munich, Germany

Abstract: Several studies on the banking sector have shown that Islamic banks are more financially robust and stable compared to conventional banks, mostly in periods of financial crises. The aim of this research is to measure and compare the level of stability between Islamic and conventional banks in Saudi Arabia using quarterly data. The sample covers around two-thirds of banks operating in the Saudi stock market, and data comprises the last global financial crisis. The panel data model shows that Islamic banks relatively reduce the financial stability index; meanwhile, they contribute efficiently to enhance financial stability through the diversification of their assets. According to our findings Riyad Bank and SAMBA positively impact the financial stability, while Al-Rajhi bank has a positive but moderate role in enhancing the banking stability. As well, the Saudi banking sector exhibits a weak competitiveness which negatively impact the banking stability. Consequently, the limited presence of Islamic banks in the Saudi banking sector menaces any efforts to improve the financial stability.

Keywords: Islamic Banks; Financial Crisis; Financial Stability; Z-score Model; Saudi Arabia. (search for similar items in EconPapers)
JEL-codes: C12 C23 G21 G28 G33 (search for similar items in EconPapers)
Date: 2018-02-03, Revised 2019-01-05
New Economics Papers: this item is included in nep-ara and nep-isf
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Published in International Journal of Islamic and Middle Eastern Finance and Management 3.12(2019): pp. 448-468

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Related works:
Journal Article: Panel modeling of z-score: evidence from Islamic and conventional Saudi banks (2019) Downloads
Working Paper: Panel Modeling of Z-score: Evidence from Islamic and Conventional Saudi Banks (2019) Downloads
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