PurposeThe paper aims to gain an insight into behavioural characteristics of Islamic banks and how they influence the risk‐taking decisions of Islamic banks in financial markets within the prospect theory context.Design/methodology/approachThe study employs review and application of prospect theory in Islamic banking industry across the globe, making use of 99 Islamic banks across 14 countries.FindingsEmpirical evidence shows that Islamic banks located above target risk level tend to show risk‐adverse behaviour, while banks below target risk level inclined towards risk‐seeking attitude. Results also highlighted that banks which have higher loans to total asset ratio tend to take on lower risk.Practical implicationsIslamic bank regulators will be better prepared to monitor the Islamic banking system if they understand risk‐taking behaviour of Islamic bank managers. The findings will provide more effective bank regulatory oversight, thus preventing Islamic bank failures in future.Originality/valueSince there are relatively few studies conducted in risk‐taking behaviour of Islamic banks, specifically global Islamic banking, this study will broaden the scope of the literature by providing novel empirical evidence on risk‐taking practice of Islamic banks worldwide.

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This paper examines the effect of foreign currency borrowing and financial development on exports. A balanced panel data is constructed for the selected 17 East Asian-Pacific countries, and the cointegration relationship among the variables of the export demand function is verified using Pedroni's heterogeneous panel cointegration tests. The empirical results indicate that the effect of foreign debt on exports is conditional on the magnitude of currency depreciation. The larger the depreciation of a currency, the more its exports are adversely affected by its foreign liability. This finding might be a possible explanation as to why large exchange rate depreciation during the 1997 financial crisis failed to generate the export boom. The results also show different effects of financial shocks on exports in these economies.

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