This paper examines the impact of Islamic regulations on Islamic bank margins in ASEAN countries, utilising the fixed-effect method. The sample consists of 27 Islamic banks in Malaysia, Indonesia, Singapore and Thailand covering the period 2009 to 2017. The results suggest that Islamic regulations, such as the Islamic regulatory framework and Shari’ah supervisory board, are negatively associated with Islamic bank margins. These results have important policy implications for regulators, indicating that they should impose a separate regulatory framework for Islamic banks and bank managers to increase the number of Shari’ah scholars on the Shari’ah board in lowering Islamic bank margins. Overall, the findings suggest that Islamic banks should adopt regulations that should follow Shari’ah requirements, as they help to lower the cost of financial intermediation. As for the other control variables, only the Lerner index has a positive and significant impact on ASEAN Islamic bank's margin. Therefore, appropriate policies are necessary to foster competition in Islamic banks.
This paper examines the role of bank-specific, macroeconomic, and regulations on the performance of Islamic and conventional banks in ASEAN countries over the period 2009-2016 using a fixed-effects estimator. The results indicate that conventional and Islamic banks were significantly affected by the operating cost. We find the significant effects of bank concentration and credit risk on conventional banks' performance. For Islamic banks, we uncovered evidence suggesting that diversification and liquidity risk are important determinants of the performance of Islamic banks. Interestingly, the findings indicate that regulations are the key drivers of the performance of Islamic banks. Activity restrictions, supervisory power and Islamic regulation have a significant impact on the Islamic banks' performance. The findings highlight policy implications in improving bank performance, including reducing operating costs, less stringent supervisory power, robust Islamic regulation and effective risk management.
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