Abdelaziz Hakimi, Houssem Rachdi, Rim Ben Selma Mokni and Houda Hssini
Although most previous studies interested in Islamic banks have focused on quantitative aspects such as performance, risk and stability, this paper aims to deal with the…
Abstract
Purpose
Although most previous studies interested in Islamic banks have focused on quantitative aspects such as performance, risk and stability, this paper aims to deal with the institutional dimension and focus precisely on the link between board characteristics and bank performance.
Design/methodology/approach
Based on a data related to 13 banks in Bahrain observed over the period of 2005-2011, this study investigates the impact of board directors on the level of performance. To this end, the authors have used two empirical approaches. The first one is the panel data analysis with regard to random effect (RE) regression. The second one is the generalized method of moments (GMM) in system, which checked the soundness of the first result.
Findings
The result of RE regression indicates that the board duality is positively and significantly correlated with the bank performance for both ROA (return on assets) and ROE (return on equity). However, the board size exerts a positive and significant impact only when profitability is measured by ROE. The authors find that regression with GMM in system confirms the RE result exclusively for ROE. Findings also indicate that a financial crisis exerts a negative but not significant effect on bank performance.
Practical implications
These findings are relevant to both policymakers and regulators. Islamic banks in Bahrain should grant more importance to the structure and the quality of the board to improve their performance.
Originality/value
This study aims to extend the existing literature by focusing about the role of the Shariah board in bank performance.
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Rim Ben Selma Mokni, Mohamed Tahar Rajhi and Houssem Rachdi
The purpose of this paper is to investigate determinants of risk-taking in Islamic banks and conventional banks located in the MENA region.
Abstract
Purpose
The purpose of this paper is to investigate determinants of risk-taking in Islamic banks and conventional banks located in the MENA region.
Design/methodology/approach
The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009. The authors estimate models using both generalized least square random effect and generalized method of moments system approaches.
Findings
The results of the empirical analysis show that the determinants’ risk-taking significance varies between Islamic and conventional banks.
Originality/value
The main aim is to develop a comprehensive model that integrates macroeconomic determinants, industry-specific determinants, and bank-specific determinants. This paper performs a comparison of the risk-taking between two different banking systems in the MENA region.
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Naama Trad, Houssem Rachdi, Abdelaziz Hakimi and Khaled Guesmi
This paper aims to focus on the main determinants of the performance and stability-banking sector in the Middle East and North Africa (MENA) region during the global financial…
Abstract
Purpose
This paper aims to focus on the main determinants of the performance and stability-banking sector in the Middle East and North Africa (MENA) region during the global financial crisis. Using a data set of 13 countries with both of 77 Islamic and 101 conventional banks during the period 2006-2013, empirical results show that specific variables allow explaining the change in the level of performance and stability for conventional and Islamic banks. However, the effect of some banks’ characteristics is not the same for the two bank groups. For the macroeconomic effect, it is observed that inflation exerts a negative effect on the bank performance except for conventional banks when it increases the profitability.
Design/methodology/approach
Using a data set of 13 countries with both of 77 Islamic and 101 conventional banks (CvB) during the period 2006-2013 and performing the generalized method of moments (GMM) method, the findings provide comprehensive evidence for the bank systems studied which are of interest also to policy makers and practitioners.
Findings
The main finding is that after the international financial crises of 2008, many worldwide banks have been experiencing crises in contrast to Islamic banks (IsB) which remain Gen more stable and more profitable. Foreign banks had a higher degree of exposure to risk, given their higher number of subsidiaries in the developed economies. As for the determinants of profitability, the bank-specific variables allow to explain the change in the level of performance and stability for conventional and Islamic banks. However, the effect of some banks characteristics is not the same for the two bank groups. For the macroeconomic effect, it is observed that inflation exerts a negative effect on the bank performance except for CvB when it increases the profitability measured by the return on assets (ROA). It is also found that the growth rate acts positively when the dependent variable is the ROA and negatively when the performance is measured by return on equity.
Originality/value
The inflation rate exerts a negative effect only on the ROA. This study differs from previous contributions in that it is tested the hypothesis of determinants of bank profitability and stability for both conventional and Islamic banks in the MENA region. It is of great interest to both policymakers and investors, with respect to regional development policies and dedicated portfolio investment strategies in each emerging region respectively. The authors adopted several ratios from the empirical literature on bank profitability and stability. Using a data set of 13 countries with both of 77 Islamic and 101 CvB during the period 2006-2013 and performing the GMM method, the findings have significant contributions to the literature by comprehensively clarifying and critically analyzing the current state of profitability and stability for both banks.
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Houssem Rachdi and Faten Ben Bouheni
– This paper aims to present an analysis of how regulatory and supervisory policies affect risk-performance nexus.
Abstract
Purpose
This paper aims to present an analysis of how regulatory and supervisory policies affect risk-performance nexus.
Design/methodology/approach
Empirically, on a sample of 60 large European banks over the period 2005-2011, the authors explore this relationship by using the panel smooth transition regression (PSTR) modeling because the nexus between risk and performance is nonlinear and it depends on specific national factors especially regulatory and supervisory policies.
Findings
The major finding of this study is that the effect of risk on banking performance is conditional by the improvement of banking governance in Europe.
Practical implications
The PSTR helps to account for a change of regime in the effects of risk on performance.
Originality/value
This paper explains the use of PSTR modeling.
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Rim Ben Selma Mokni and Houssem Rachdi
– Which of the banking stream is relatively more profitable in Middle Eastern and North Africa (MENA) region?
Abstract
Purpose
Which of the banking stream is relatively more profitable in Middle Eastern and North Africa (MENA) region?
Design/methodology/approach
The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009.The authors estimate models using the generalized method of moments in system, of Blundell and Bond (1998). They exploit an up-to-date econometric technique which takes into consideration the issue of endogeneity of regressors to evaluate the comparative profitability of Islamic and conventional banks in the MENA region.
Findings
Empirical analysis results show that the determinants’ significance varies between Islamic and conventional banks. Profitability seems to be quite persistent in the MENA region reflecting a higher degree of government intervention and may signal barriers to competition.
Originality/value
The main interest is to develop a comprehensive model that integrates macroeconomic, industry-specific and bank-specific determinants. The paper makes comparison of the performance between two different banking systems in the MENA region. The authors consider a variable crisis to gain additional insights into the impacts of the financial crisis on MENA banking sector.
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Rim Ben Selma Mokni, Abdelghani Echchabi, Dhekra Azouzi and Houssem Rachdi
– The main purpose of this study is to investigate in detail the way each risk is being measured and managed by Islamic banks in the MENA region.
Abstract
Purpose
The main purpose of this study is to investigate in detail the way each risk is being measured and managed by Islamic banks in the MENA region.
Design/methodology/approach
This research attempts to examine the perceptions of Islamic bankers about the importance of transparency and public disclosure in the understanding of the bank's risk profile. It covers 23 Islamic banks located in the MENA region using self-administered questionnaire.
Findings
The results show that there are differences in the level of risk perception across funding modes. Also Islamic banks use extensively the traditional tools in mitigating risk.
Practical implications
The paper discusses and analyses the current practices employed in the risk management of Islamic banks. It identifies the tools and methods used in managing credit risk, market risk, liquidity risk and operational risk by Islamic banks.
Originality/value
This study aims to extend the existing literature in two ways. First, this paper contributes to the dearth of studies on examination of tools practiced in the risk management by Islamic banks located in the MENA region. Next, this work integrates the methods used in the management of liquidity risk that have not been studied earlier.