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The performance of Islamic banks during the 2008 global financial crisis

The performance of Islamic banks during the 2008 global financial crisis The purpose of this study is to analyze the profitability performance of Islamic banks (IBs) of the Gulf Cooperation Council (GCC) region during 2008 global financial crisis.Design/methodology/approachBank-specific data are taken from the Bank Scope database and macroeconomic data are collected from International Financial Statistics. Using a panel data series of 30 banks for the period of 2005 to 2011, the study shows the evidence of structural break for the crisis year as well as the factors that impact the profitability of IBs.FindingsThe performance of GCC IBs was significantly influenced during the crisis period by capital adequacy, credit risk, financial risk, operational efficiency, liquidity, bank size, gross domestic product, growth rate of money supply, bank sector development and inflation rate. The study also finds that there is a structural change before and after the global financial crisis.Originality/valueThis is an original study that shows that the Sharīʿah-compliant banks have performed better during the crisis and are not affected based on their internal performance records; rather, they have been affected indirectly from the macro shock owing to the overall economic crisis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Islamic Accounting and Business Research Emerald Publishing

The performance of Islamic banks during the 2008 global financial crisis

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References (36)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1759-0817
DOI
10.1108/jiabr-01-2017-0011
Publisher site
See Article on Publisher Site

Abstract

The purpose of this study is to analyze the profitability performance of Islamic banks (IBs) of the Gulf Cooperation Council (GCC) region during 2008 global financial crisis.Design/methodology/approachBank-specific data are taken from the Bank Scope database and macroeconomic data are collected from International Financial Statistics. Using a panel data series of 30 banks for the period of 2005 to 2011, the study shows the evidence of structural break for the crisis year as well as the factors that impact the profitability of IBs.FindingsThe performance of GCC IBs was significantly influenced during the crisis period by capital adequacy, credit risk, financial risk, operational efficiency, liquidity, bank size, gross domestic product, growth rate of money supply, bank sector development and inflation rate. The study also finds that there is a structural change before and after the global financial crisis.Originality/valueThis is an original study that shows that the Sharīʿah-compliant banks have performed better during the crisis and are not affected based on their internal performance records; rather, they have been affected indirectly from the macro shock owing to the overall economic crisis.

Journal

Journal of Islamic Accounting and Business Research – Emerald Publishing

Published: May 7, 2019

Keywords: Gulf Cooperation Council; Global financial crisis; ROA; Sharīʿah compliance; Islamic bank; GCC region

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