Risk-Taking Behaviour of Islamic Banks: A Panel Study

Ahmad Al-Harbi

doi:doi:10.11648/j.ijefm.20221001.13

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Risk-Taking Behaviour of Islamic Banks: A Panel Study

Ahmad Al-Harbi

Published in International Journal of Economics, Finance and Management Sciences (Volume 10, Issue 1)

Received: 21 November 2021 Accepted: 13 January 2022 Published: 28 January 2022

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Abstract

The aim of this paper is to investigate the factors that impact the risk-taking behavior of Islamic banks before the 2008 financial crisis. The study covers a sample of 110 Islamic banks (represent almost all the Islamic banks in the world) across twenty-five countries which are members of the Organization of Islamic Cooperation (OIC; the organization has 57 members), during the period 1989-2008. The author uses a two-step system generalized method of moments dynamic model to analyze the data. Moreover, Fixed Effect (FE) and Random Effect (RE) models are used to check the robustness of the study results. The results show that profitability, liquidity, management efficiency, size and money supply growth reduce Islamic banks risk. On the other hand, capital adequacy, off-balance sheet activities, concentration, deposit insurance, GDP growth and inflation increase Islamic banks risk. The implications of this study can be beneficial to policymakers, regulators, and banks managers in countries with dual financial system or Islamized financial system as it will help them formulate better policies to ensure the stability of the financial system. To be noted that, according to the best of the author knowledge, this is the first paper that study the factors affecting the risk-taking behavior of Islamic banks using a large sample of Islamic banks with a prolonged period (20 years).

Published in	International Journal of Economics, Finance and Management Sciences (Volume 10, Issue 1)
DOI	10.11648/j.ijefm.20221001.13
Page(s)	28-36
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Islamic Banks, Risk-taking, GMM Estimation

References

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APA Style

Ahmad Al-Harbi. (2022). Risk-Taking Behaviour of Islamic Banks: A Panel Study. International Journal of Economics, Finance and Management Sciences, 10(1), 28-36. https://doi.org/10.11648/j.ijefm.20221001.13

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ACS Style

Ahmad Al-Harbi. Risk-Taking Behaviour of Islamic Banks: A Panel Study. Int. J. Econ. Finance Manag. Sci. 2022, 10(1), 28-36. doi: 10.11648/j.ijefm.20221001.13

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AMA Style

Ahmad Al-Harbi. Risk-Taking Behaviour of Islamic Banks: A Panel Study. Int J Econ Finance Manag Sci. 2022;10(1):28-36. doi: 10.11648/j.ijefm.20221001.13

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@article{10.11648/j.ijefm.20221001.13,
  author = {Ahmad Al-Harbi},
  title = {Risk-Taking Behaviour of Islamic Banks: A Panel Study},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {10},
  number = {1},
  pages = {28-36},
  doi = {10.11648/j.ijefm.20221001.13},
  url = {https://doi.org/10.11648/j.ijefm.20221001.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20221001.13},
  abstract = {The aim of this paper is to investigate the factors that impact the risk-taking behavior of Islamic banks before the 2008 financial crisis. The study covers a sample of 110 Islamic banks (represent almost all the Islamic banks in the world) across twenty-five countries which are members of the Organization of Islamic Cooperation (OIC; the organization has 57 members), during the period 1989-2008. The author uses a two-step system generalized method of moments dynamic model to analyze the data. Moreover, Fixed Effect (FE) and Random Effect (RE) models are used to check the robustness of the study results. The results show that profitability, liquidity, management efficiency, size and money supply growth reduce Islamic banks risk. On the other hand, capital adequacy, off-balance sheet activities, concentration, deposit insurance, GDP growth and inflation increase Islamic banks risk. The implications of this study can be beneficial to policymakers, regulators, and banks managers in countries with dual financial system or Islamized financial system as it will help them formulate better policies to ensure the stability of the financial system. To be noted that, according to the best of the author knowledge, this is the first paper that study the factors affecting the risk-taking behavior of Islamic banks using a large sample of Islamic banks with a prolonged period (20 years).},
 year = {2022}
}

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TY  - JOUR
T1  - Risk-Taking Behaviour of Islamic Banks: A Panel Study
AU  - Ahmad Al-Harbi
Y1  - 2022/01/28
PY  - 2022
N1  - https://doi.org/10.11648/j.ijefm.20221001.13
DO  - 10.11648/j.ijefm.20221001.13
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 28
EP  - 36
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20221001.13
AB  - The aim of this paper is to investigate the factors that impact the risk-taking behavior of Islamic banks before the 2008 financial crisis. The study covers a sample of 110 Islamic banks (represent almost all the Islamic banks in the world) across twenty-five countries which are members of the Organization of Islamic Cooperation (OIC; the organization has 57 members), during the period 1989-2008. The author uses a two-step system generalized method of moments dynamic model to analyze the data. Moreover, Fixed Effect (FE) and Random Effect (RE) models are used to check the robustness of the study results. The results show that profitability, liquidity, management efficiency, size and money supply growth reduce Islamic banks risk. On the other hand, capital adequacy, off-balance sheet activities, concentration, deposit insurance, GDP growth and inflation increase Islamic banks risk. The implications of this study can be beneficial to policymakers, regulators, and banks managers in countries with dual financial system or Islamized financial system as it will help them formulate better policies to ensure the stability of the financial system. To be noted that, according to the best of the author knowledge, this is the first paper that study the factors affecting the risk-taking behavior of Islamic banks using a large sample of Islamic banks with a prolonged period (20 years).
VL  - 10
IS  - 1
ER  -

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Ahmad Al-Harbi

Saudi Arabia Ministry of Economy and Planning, Riyadh, Saudi Arabia

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Ahmad Al-Harbi. (2022). Risk-Taking Behaviour of Islamic Banks: A Panel Study. International Journal of Economics, Finance and Management Sciences, 10(1), 28-36. https://doi.org/10.11648/j.ijefm.20221001.13

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ACS Style

Ahmad Al-Harbi. Risk-Taking Behaviour of Islamic Banks: A Panel Study. Int. J. Econ. Finance Manag. Sci. 2022, 10(1), 28-36. doi: 10.11648/j.ijefm.20221001.13

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AMA Style

Ahmad Al-Harbi. Risk-Taking Behaviour of Islamic Banks: A Panel Study. Int J Econ Finance Manag Sci. 2022;10(1):28-36. doi: 10.11648/j.ijefm.20221001.13

Copy | Download

@article{10.11648/j.ijefm.20221001.13,
  author = {Ahmad Al-Harbi},
  title = {Risk-Taking Behaviour of Islamic Banks: A Panel Study},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {10},
  number = {1},
  pages = {28-36},
  doi = {10.11648/j.ijefm.20221001.13},
  url = {https://doi.org/10.11648/j.ijefm.20221001.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20221001.13},
  abstract = {The aim of this paper is to investigate the factors that impact the risk-taking behavior of Islamic banks before the 2008 financial crisis. The study covers a sample of 110 Islamic banks (represent almost all the Islamic banks in the world) across twenty-five countries which are members of the Organization of Islamic Cooperation (OIC; the organization has 57 members), during the period 1989-2008. The author uses a two-step system generalized method of moments dynamic model to analyze the data. Moreover, Fixed Effect (FE) and Random Effect (RE) models are used to check the robustness of the study results. The results show that profitability, liquidity, management efficiency, size and money supply growth reduce Islamic banks risk. On the other hand, capital adequacy, off-balance sheet activities, concentration, deposit insurance, GDP growth and inflation increase Islamic banks risk. The implications of this study can be beneficial to policymakers, regulators, and banks managers in countries with dual financial system or Islamized financial system as it will help them formulate better policies to ensure the stability of the financial system. To be noted that, according to the best of the author knowledge, this is the first paper that study the factors affecting the risk-taking behavior of Islamic banks using a large sample of Islamic banks with a prolonged period (20 years).},
 year = {2022}
}

Copy | Download

TY  - JOUR
T1  - Risk-Taking Behaviour of Islamic Banks: A Panel Study
AU  - Ahmad Al-Harbi
Y1  - 2022/01/28
PY  - 2022
N1  - https://doi.org/10.11648/j.ijefm.20221001.13
DO  - 10.11648/j.ijefm.20221001.13
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 28
EP  - 36
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20221001.13
AB  - The aim of this paper is to investigate the factors that impact the risk-taking behavior of Islamic banks before the 2008 financial crisis. The study covers a sample of 110 Islamic banks (represent almost all the Islamic banks in the world) across twenty-five countries which are members of the Organization of Islamic Cooperation (OIC; the organization has 57 members), during the period 1989-2008. The author uses a two-step system generalized method of moments dynamic model to analyze the data. Moreover, Fixed Effect (FE) and Random Effect (RE) models are used to check the robustness of the study results. The results show that profitability, liquidity, management efficiency, size and money supply growth reduce Islamic banks risk. On the other hand, capital adequacy, off-balance sheet activities, concentration, deposit insurance, GDP growth and inflation increase Islamic banks risk. The implications of this study can be beneficial to policymakers, regulators, and banks managers in countries with dual financial system or Islamized financial system as it will help them formulate better policies to ensure the stability of the financial system. To be noted that, according to the best of the author knowledge, this is the first paper that study the factors affecting the risk-taking behavior of Islamic banks using a large sample of Islamic banks with a prolonged period (20 years).
VL  - 10
IS  - 1
ER  -

Copy | Download