Indira Parmankulova, Parida Issakhova, Zhanar Zhanabayeva, Alimshan Faizulayev and Kulzira Orazymbetova
This study aims to investigate the determinants of banking stability in the case of QISMUT + 3 countries (Qatar, Indonesia, Malaysia, United Arab Emirates, Turkey, Pakistan…
Abstract
Purpose
This study aims to investigate the determinants of banking stability in the case of QISMUT + 3 countries (Qatar, Indonesia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain). Both profitability of banks and non-performing loans were treated as dependent variables. Three variations are examined, the sample as a whole and separated to conventional banks (CBs) and Islamic banks (IBs).
Design/methodology/approach
Data from 208 banks, both IBs and CBs, were used from 2011 to 2018, after global financial crisis period. Two-step system generalized methods of moments and both feasible least squares and panel-corrected standard error models were used to ensure test the data.
Findings
Results suggest that both financial vulnerability and profitability affect each other in both banking systems. In addition, capital adequacy has a positive link with both dependent variables. Corruption varied and followed expectations but for the case of CBs alone with an unexpected negative relationship with profitability.
Practical implications
The findings are expected to help bankers, investors, academics and policymakers gain a better understanding of Islamic banking. The findings would be useful in developing policy for the development of the banking industries in these countries.
Originality/value
This study contributes to existing literature in three ways. First, this study investigates the factors influencing banking non-performing loans for a new class of countries – QISMUT + 3 within 2011–2018 period. Second, only a few studies use such a period, which is after the global financial crisis period. Finally, new indicators are used to determine the non-performing loans and profitability of both types of banks, such as Muslim Share and Share of IBs.
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Alimshan Faizulayev, Isah Wada, Asset Sadvakasovna Kyzdarbekova and Indira Parmankulova
This study aims to examine the dynamics of banking competition between Islamic banks (IBs) and conventional banks (CBs) in emerging finance-oriented Islamic economies, also known…
Abstract
Purpose
This study aims to examine the dynamics of banking competition between Islamic banks (IBs) and conventional banks (CBs) in emerging finance-oriented Islamic economies, also known as the QISMUT + 3 (i.e. Qatar, Indonesia, Saudi Arabia, Malaysia, the United Arab Emirates, Turkey, Bahrein, Kuwait and Pakistan). The main aim was to conduct a comparative market power analysis between IBs and CBs in the 2006–2015 period.
Design/methodology/approach
The study used bank-specific and macro-economic variables available in the Orbis Bank Focus and the World Bank databases. The study applied a dynamic approach to detect endogeneity problems and unobserved heterogeneity using the two-step system GMM estimate.
Findings
The research shows that market power persists in both types of banks over time. It also demonstrates that capital adequacy does not explain the market power of banking in the studied countries. Unlike IBs, the scale of banking does not influence the market power CBs. Corruption undermines competition in the conventional banking system. However, because of the ideological orientation of IBs, corruption does not affect their competitiveness. IBs outperform CBs in QISMUT + 3 countries in terms of banking competitiveness. They also have higher persistency of market power in the region.
Practical implications
This study is a very beneficial source of information that can provide effective guidelines for efficient productivity and improved competitiveness of IBs and CBs in finance-oriented Islamic countries.
Originality/value
The study is the first to compare the market power of IBs and CBs in this country classification. In addition, the study examined a large number of IBs and CBs to carry out this research.
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Kamshat Kanapiyanova, Alimshan Faizulayev, Rashid Ruzanov, Joanna Ejdys, Dina Kulumbetova and Marei Elbadri
This paper aims to explore the drivers of banking stability in the case of QISMUT+3 countries (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates, Turkey, Pakistan…
Abstract
Purpose
This paper aims to explore the drivers of banking stability in the case of QISMUT+3 countries (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain) focusing on social and governmental responsibility (SGR) determinants. Both main indicators of banking stability, namely, profitability and nonperforming loans, were treated as dependent variables. The model is examined with the whole sample and separately by examining commercial banks and Islamic banks.
Design/methodology/approach
Cross-country bank-level panel data spanning from 2011 to 2018 is used. Two-step system generalized methods of moments alongside both panel-corrected standard error and feasible generalized least squares models were applied to ensure the robustness of the results.
Findings
Findings reveal that capital adequacy and corruption control are the most dominant determinants of banking profitability in the studied sample regardless of the type of the bank. In addition, profitability, efficient management, inflation and government effectiveness were found to be the main drivers of financial vulnerability risk.
Practical implications
Findings of this study offer many insights and policy implications to help stakeholders gain a comprehensive understanding of banking stability. Suggested policy implications targeting bank management, governmental policymakers and investors are offered to better the banking stability of QISMUT+3 countries.
Originality/value
This paper has multiple contributions to the existing literature. The determinants of banking stability are examined in QISMUT+3 group of countries which is the focus of a limited number of studies. In addition, the use of a comprehensive variable set alongside the addition of SGR determinants in the case of banking system stability is one of the main contributions of this paper.