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Article
Publication date: 8 February 2021

Mudeer Ahmed Khattak and Mohsin Ali

This paper aims to investigate the impact of banking market competition on banks’ profitability and banks’ risk using a sample of six countries from the Middle East from 2006 to…

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Abstract

Purpose

This paper aims to investigate the impact of banking market competition on banks’ profitability and banks’ risk using a sample of six countries from the Middle East from 2006 to 2017.

Design/methodology/approach

This paper uses the system generalized method of moments estimator to tackle potential omitted variable bias, endogeneity and simultaneity issues.

Findings

After controlling for bank market and country-specific characteristics, this study reports strong and robust evidence that competition in the banking market is conducive to lower financial performance. This research further finds that intense banking competition leads to lower profitability and increased risk regardless of bank type. As the relationship is not different for Islamic banks, one can argue that activities of Islamic banks are based on the basic traditional banking operations and products, and banks need to diversify their business activities to reduce failure risk and preserve the banking sector’s stability.

Originality/value

This paper tries to bridge the gap by studying the impact of competition on bank performance in high-income dual banking Gulf Cooperation Council (GCC) economies. Earlier studies have either covered all the dual banking economies or the Middle East and North African region. The authors suggest that the GCC banking market is required to be studied separately because of its idiosyncrasies. Second, unlike earlier studies, the authors have not only examined the impact of competition on bank return but also on bank risk.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 14 no. 4
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 14 October 2022

Mohsin Ali, Mudeer Ahmed Khattak, Shabeer Khan and Noureen Khan

The purpose of this study is to examine the impact of the COVID-19 pandemic on Association of Southeast Asian Nations (ASEAN) Islamic and conventional equities.

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Abstract

Purpose

The purpose of this study is to examine the impact of the COVID-19 pandemic on Association of Southeast Asian Nations (ASEAN) Islamic and conventional equities.

Design/methodology/approach

To study the impact of the COVID-19 pandemic on ASEAN Islamic and conventional equities, first, the authors calculated the volatility by using exponential generalized autoregressive conditional heteroscedasticity methodology and then used Wavelet methodology to see the co-movement between the volatility and returns of ASEAN equity market indicators and COVID-19 cases.

Findings

The authors find that until the beginning of August, COVID-19 adversely relates to the returns of both the indices. The conventional index seemed to have increased volatility during the time period, whereas the Islamic index seemed to have declined volatility.

Originality/value

To the best of the authors’ knowledge, this is one of the very few studies examining the impact of the COVID-19 pandemic on ASEAN Islamic and conventional equities. Additionally, this study adds value by comparing Islamic and conventional equities.

Details

Studies in Economics and Finance, vol. 40 no. 4
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 24 May 2021

Mohsin Ali, Mudeer Ahmed Khattak and Nafis Alam

The study of credit risk has been of the utmost importance when it comes to measuring the soundness and stability of the banking system. Due to the growing importance of Islamic…

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Abstract

Purpose

The study of credit risk has been of the utmost importance when it comes to measuring the soundness and stability of the banking system. Due to the growing importance of Islamic banking system, a fierce competition between Islamic and conventional banks have started to emerge which in turn is impacting credit riskiness of both banking system.

Design/methodology/approach

Using the system GMM technique on 283 conventional banks and 60 Islamic banks for the period of 2006–2017, this paper explores the important impact of size and competition on the credit risk in 15 dual banking economies.

Findings

The authors found that as bank competition increases credit risk seems to be reduced. On the size effect, the authors found that big Islamic banks are less risky than big conventional banks whereas small Islamic banks are riskier than small conventional banks. The results are robust for different panel data estimation models and sub-samples of different size groups. The findings of this paper provide important insights into the competition-credit risk nexus in the dual banking system.

Originality/value

The paper is specifically focused on credit risk in dual banking environment and tries to fill the gap in the literature by studying (1) do the Islamic and conventional banks exhibit a different level of credit risk; (2) does competition in the banking system impact the credit risk of Islamic and conventional banks and finally (3) do the big and small banks exhibit similar levels of credit risk.

Details

International Journal of Emerging Markets, vol. 18 no. 4
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 4 March 2022

Shinaj Valangattil Shamsudheen, Mudeer Ahmed Khattak, Aishath Muneeza and Makeen Huda

This study aims to investigate the reaction (in terms of returns and volatility) of Gulf Cooperation Council (GCC) country-wise stock markets (both conventional and Islamic) in…

353

Abstract

Purpose

This study aims to investigate the reaction (in terms of returns and volatility) of Gulf Cooperation Council (GCC) country-wise stock markets (both conventional and Islamic) in response to the surge of COVID-19 cases, with special reference to the announcement of financial stimulus packages in each country and the recent global oil price plunge. Further, the study also examines the impact of COVID-19 cases on the stock market returns of each GCC country and the continuous dynamics of correlation between COVID-19 cases and GCC stock markets.

Design/methodology/approach

This study uses an exponential generalized auto regressive conditional heteroskedasticity model and continuous wavelet coherence to estimate the stock market volatility and co-movement between COVID-19 cases and stock returns.

Findings

Empirical findings indicate an adverse reaction (negative returns and high volatility) during the period examined, with the stimulus package resulting in a positive transformation of returns in each country-level stock market as well as the regional stock index. Further, no evidence of an adverse effect of the oil price plunge is identified. All findings are identical between both conventional and Islamic stock indices.

Originality/value

While ample research has been conducted on the impact and dynamics of the pandemic on stock markets, little has addressed the areas of financial stimulus packages and the oil price plunge. The findings of this study show that further research needs to be conducted to elucidate the ways in which effective financial stimulus packages can be formulated in the GCC region to mitigate the adverse effects of COVID-19 for economies without causing major financial deficits, as well as to find strategies to diversify economies away from the oil curse.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 15 no. 2
Type: Research Article
ISSN: 1753-8394

Keywords

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