Mehmet Asutay, Yusuf Ayturk and Ercument Aksak
This study examines the impact of the regulatory and supervisory environment on the risk-taking behaviour of Islamic banks. The impact of the heterogeneous nature of the banking…
Abstract
Purpose
This study examines the impact of the regulatory and supervisory environment on the risk-taking behaviour of Islamic banks. The impact of the heterogeneous nature of the banking environment in the sampled countries is also considered.
Design/methodology/approach
A dynamic panel data analysis with system GMM estimators was used with a sample consisting of 120 Islamic banks from 21 countries for the period 2000-2013.
Findings
The results demonstrate that main regulation and supervision proxies have significant negative effects on risk levels of Islamic banks, which implies that further restricted regulatory and supervisory environment can lower risk levels of Islamic banks. In addition, the Islamic banks operating under the dual banking system seem to prefer to take a lower risk. Furthermore, the results identify that a stable political environment encourages Islamic banks to take higher risks in their operations.
Originality/value
In addition to examining the common factors, the empirical analysis in this study is extended to the investigation of the effects of several political indicators on risk-taking behaviour of Islamic banks, which should be considered as an important contribution.
Details
Keywords
Zaminor Zamzamir@Zamzamin, Razali Haron, Zatul Karamah Ahmad Baharul Ulum and Anwar Hasan Abdullah Othman
This study examines the impact of hedging on firm value of Sharīʿah compliant firms (SCFs) in a non-linear framework.
Abstract
Purpose
This study examines the impact of hedging on firm value of Sharīʿah compliant firms (SCFs) in a non-linear framework.
Design/methodology/approach
This study employs the system-GMM for dynamic panel data to examine the influence of derivatives usage on firm value (Tobin's Q, ROA and ROE). The sample comprised of 59 non-financial SCFs engaged in derivatives from 2000 to 2017 (18 years). The Sasabuchi-Lind-Mehlum (SLM) test for U-shaped is performed to confirm the existence of the non-linear relationship.
Findings
This study concludes that hedging significantly contributes to firm value of SCFs based on the non-linear framework. This study suggests that, first, the non-linear relationship occurs due to the different degree of derivatives usage and risk. Second, firms practice selective hedging to maintain the upside potential of firm value.
Research limitations/implications
This study has important implications. First, the importance of risk management via derivatives to increase firm value, second, the evidence of selective hedging from the non-linear relationship between derivatives and firm value and third, the need for quality reporting on derivatives engagement by firms in line with the required accounting standard on derivatives.
Originality/value
This study fills the gap in the literature in relation to the risk management strategies of SCFs in three aspects. First, re-examines the relationship using recent data. Second, examines the relationship in the non-linear framework as the limited studies found in the literature on Malaysian firms are only based on linear relationship. Third, determines whether hedging undertaken by firms is optimal as this can only be addressed using the non-linear framework. This study is robust to the various definitions of firm value (Tobin's Q, ROA and ROE) and non-linear methodologies.