Tauhidul Islam Tanin, Abu Umar Faruq Ahmad and Mohammad Omar Farooq
Mohammad Ashraful Ferdous Chowdhury and Mohamed Eskandar Shah Mohd Rasid
The main objective of this study is to identify the main determinants of the Islamic banks’ performance in Gulf Cooperation Council (GCC) regions.
Abstract
Purpose
The main objective of this study is to identify the main determinants of the Islamic banks’ performance in Gulf Cooperation Council (GCC) regions.
Methodology/approach
The research uses both static model (fixed effects and random effects) and Generalized method of Moments (GMM). The data for this study are obtained from the annual reports of 29 Islamic banks from GCC countries using Bankscope database for the period from 2005 to 2013.
Findings
The empirical findings reveal that Islamic banks’ specific factors such as the equity financing and bank size are positive and statistically significant to the profitability of Islamic banks. The operating efficiency ratio is negatively and statistically significant to return on asset. It is also found that macroeconomic variables such as money supply and inflation are negatively and statistically significant to the performance of Islamic banks whereas oil price has been found positive and statistically significant to the performance of Islamic banks in the GCC region.
Research implications
The present study seeks to fill a demanding gap in the literature by providing new empirical evidence on the factors that influence the profitability of the Islamic banking sector in GCC regions.
Originality/value
These findings have significant contribution to the literature by comprehensively clarifying and critically analyzing the current state of profitability among the Islamic banks in GCC regions.
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Sajid Hussain, Firdous Kausar, Ashraf Masood and Jong Hyuk Park
As large‐scale homogeneous networks suffer from high costs of communication, computation, and storage requirements, the heterogeneous sensor networks (HSN) are preferred because…
Abstract
Purpose
As large‐scale homogeneous networks suffer from high costs of communication, computation, and storage requirements, the heterogeneous sensor networks (HSN) are preferred because they provide better performance and security solutions for scalable applications in dynamic environments. Random key pre‐distribution schemes are vulnerable to collusion attacks. The purpose of this paper is to propose an efficient collusion resistant security mechanism for heterogeneous sensor networks.
Design/methodology/approach
The authors consider a heterogeneous sensor network (HSN) consists of a small number of powerful high‐end H‐sensors and a large number of ordinary low‐end L‐sensors. However, homogeneous sensor network (MSN) consists of only L‐sensors. Since the collusion attack on key pre‐distribution scheme mainly takes advantage of the globally applicable keys, which are selected from the same key pool, they update the key ring after initial deployment and generate new key rings by using one‐way hash function on nodes' IDs and initial key rings. Further, in the proposed scheme, every node is authenticated by the BS in order to join the network.
Findings
The analysis of the proposed scheme shows that even if a large number of nodes are compromised, an adversary can only exploit a small number of keys near the compromised nodes, while other keys in the network remain safe.
Originality/value
The proposed key management scheme described in the paper outperforms the previous random key pre‐distribution schemes by: considerably reducing the storage requirement, and providing more resiliency against node capture and collusion attacks.
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Muhammad Rabiu Danlami, Muhamad Abduh and Lutfi Abdul Razak
This study aims to examine the nexus between CAMELS, risk-sharing financial performance and Islamic banks' stability. It also attempts to assess the conditioning effects of…
Abstract
Purpose
This study aims to examine the nexus between CAMELS, risk-sharing financial performance and Islamic banks' stability. It also attempts to assess the conditioning effects of institutional quality in the relationship between risk-sharing contracts and the stability of Islamic banks.
Design/methodology/approach
The quantitative research design was employed using secondary data from 20 Islamic banks in six countries over the period 2007–2019. The study utilized the feasible generalized least squares method for the analysis.
Findings
The results indicate that not all CAMELS variables support the stability of Islamic banks. The musharakah contract induced stability of the banks, whereas mudarabah financing reduced it. The interaction between risk-sharing finance and the quality of institutions suggested that the mudarabah contract via institutional quality raises the stability of Islamic banks. On the other hand, the quality of institutions encourages the banks to offer more musharakah, but it leads to an increase in their risk-taking. We show the impact of changes in risk-sharing variables on stability amplified by institutional quality. The results were robust when alternative measures of stability were used.
Practical implications
Various stakeholders in banking activities could learn from the results of this study. Islamic banks could improve their positions in terms of screening for risk-sharing financing. They could also leverage more on musharakah, as it promotes stability and could generate more returns for the banks. The mudarabah financing can be improved if there is a proper evaluation of entrepreneurs. Policymakers would learn more about the importance of institutional quality, as it provides a friendly environment for both mudarabah and musharakah businesses to thrive. This could increase the participation of Islamic banks in the real economy.
Originality/value
Previous studies concentrated on the effects of CAMELS on the profitability of Islamic banks. This study shows that CAMELS alone might not necessarily capture the financial performance of Islamic banks. Therefore, the risk-sharing financing variables are included alongside CAMELS to determine their effects on stability. Second, unlike the past research, this study used the quality of institutions to moderate the nexus between risk-sharing financing and the stability of Islamic banks.
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Asima Siddique, Muhammad Asif Khan and Zeeshan Khan
Among all of the world's continents, Asia is the most important continent and contributes 60% of world growth but facing the serving issue of high nonperforming loans (NPLs)…
Abstract
Purpose
Among all of the world's continents, Asia is the most important continent and contributes 60% of world growth but facing the serving issue of high nonperforming loans (NPLs). Therefore, the current study aims to capture the effect of credit risk management and bank-specific factors on South Asian commercial banks' financial performance (FP). The credit risk measures used in this study were NPLs and capital adequacy ratio (CAR), while cost-efficiency ratio (CER), average lending rate (ALR) and liquidity ratio (LR) were used as bank-specific factors. On the other hand, return on equity (ROE) and return on the asset (ROA) were taken as a measure of FP.
Design/methodology/approach
Secondary data were collected from 19 commercial banks (10 commercial banks from Pakistan and 9 commercial banks from India) in the country for a period of 10 years from 2009 to 2018. The generalized method of moment (GMM) is used for the coefficient estimation to overcome the effects of some endogenous variables.
Findings
The results indicated that NPLs, CER and LR have significantly negatively related to FP (ROA and ROE), while CAR and ALR have significantly positively related to the FP of the Asian commercial banks.
Practical implications
The current study result recommends that policymakers of Asian countries should create a strong financial environment by implementing that monetary policy that stimulates interest rates in this way that automatically helps to lower down the high ratio of NPLs (tied monitoring system). Liquidity position should be well maintained so that even in a high competition environment, the commercial is able to survive in that environment.
Originality/value
The present paper contributes to the prevailing literature that this is a comparison study between developed and developing countries of Asia that is a unique comparison because the study targets only one region and then on the basis of income, the results of this study are compared. Moreover, the contribution of the study is to include some accounting-based measures and market-based measures of the FP of commercial banks at a time.
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Ibrahim Nandom Yakubu and Alhassan Bunyaminu
This study aims to examine the impact of economic globalization on bank profitability in Sub-Saharan Africa.
Abstract
Purpose
This study aims to examine the impact of economic globalization on bank profitability in Sub-Saharan Africa.
Design/methodology/approach
The empirical analysis is based on panel data of banks spanning 2008–2016. Relying on the KOF Globalization Index, the study uses financial globalization and trade globalization as measures of economic globalization. The authors employ the system generalized method of moments technique to establish the relationship between economic globalization and bank profitability while controlling for the effect of bank-specific and macroeconomic factors.
Findings
The results show a negative significant effect of financial and trade globalization on bank profitability, signifying the intense competition of banks in Sub-Saharan Africa accelerated by globalization. The negative effect of economic globalization holds irrespective of the indicator of bank profitability. Bank size exerts a significant effect on profitability though the impact is negative for return on equity measure. The findings further reveal a positive significant impact of GDP growth and inflation on profitability.
Originality/value
This paper presents a pioneering work on the impact of economic globalization on bank profitability in the Sub-Saharan African context per the researchers' knowledge.
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Zuhairan Yunmi Yunan, Majed Alharthi and Saeed Sazzad Jeris
This study aims to investigate the relationship between political instability and the performance of Islamic banks in emerging countries.
Abstract
Purpose
This study aims to investigate the relationship between political instability and the performance of Islamic banks in emerging countries.
Design/methodology/approach
For a data sample of 93 Islamic banks in 20 emerging countries during the period from 2011 to 2016, the authors identify indicators that matter most for the activities of Islamic banks.
Findings
The study finds that a stable government and law and order are positively correlated with the health of Islamic financial institutions. On the other hand, corruption and military involvement in politics can create an unstable environment for businesses, leading to uncertainty and risk. The study also reveals that Islamic banks operating in regions or communities with lower risk of socio-economic conditions tend to exhibit higher levels of profitability.
Originality/value
Overall, the study provides valuable insights into the impact of political instability on Islamic banks in emerging countries.
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Burak Yungucu and Buerhan Saiti
The purpose of this paper is to investigate the effects of monetary policy on the Islamic financial service industry by studying the findings of the existed literature.
Abstract
Purpose
The purpose of this paper is to investigate the effects of monetary policy on the Islamic financial service industry by studying the findings of the existed literature.
Design/methodology/approach
Because of the unavailability of the empirical models in the existing study, the authors used past studies review and proposed a new theoretical model.
Findings
Majority of these studies have documented the negative effects with the exception of a few. The transmission of the monetary policy has been taken place through interest rate risk, asset-liability mismatch, as well as deposit and financing instability. Furthermore, the examined studies have confirmed the viability of the Islamic monetary policy.
Originality/value
The proposed model may offer some insights to policy makers if it is examined empirically.
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Mahfooz Alam, Shakeb Akhtar and Mamdouh Abdulaziz Saleh Al-Faryan
This paper aims to investigate the role of corporate governance on the bank profitability of Indian banks vis-à-vis South Asian Association for Regional Cooperation (SAARC…
Abstract
Purpose
This paper aims to investigate the role of corporate governance on the bank profitability of Indian banks vis-à-vis South Asian Association for Regional Cooperation (SAARC) nations.
Design/methodology/approach
For the Corporate Governance Index, the authors examined board accountability, transparency and disclosure and audit committee, while Tobin’s Q, return on equity and return on assets are used to measure the bank’s profitability. The study used a two-stage analysis based on balanced panel data for robust findings. Sample of this study consists of 60 commercial banks from India and 60 banks from SAARC nations for the period of 2009–2021. This study used panel regression and a generalized method of moment approach using the CAMELS framework on banking industry-specific variables to determine their respective impacts.
Findings
The findings of this study suggest that board accountability is positive and significantly affects the profitability of banks as indicated by return on assets, return on equity and Tobin’s Q. In contrast, the audit committee has a positive and insignificant impact on return on assets, return on equity and Tobin’s Q, while transparency and disclosure have a negative and significant impact on these metrics. Furthermore, the country dummy result shows a significant positive impact on all the bank performance parameters, implying that Indian banks have the highest degree of convergence with corporate governance as compared to other SAARC nations.
Research limitations/implications
This study provides insight to the regulators, policymakers and financial institutions to evaluate the role of corporate governance in emerging economies. However, the findings of the study should be interpreted with caution, as the results are sensitive to the disparity between India and other SAARC nations' government policies, climatic circumstances and cultural or religious traditions.
Originality/value
To the best of the authors’ knowledge, this is the first attempt to gauge the performance of Indian banks vis-à-vis SAARC nations using the CAMELS framework approach. Further, findings of this study suggest some novel evidence tying corporate governance quality with the profitability of banks among SAARC nations.