Cushion hypothesis and credit risk: Islamic versus conventional banks from the MENA region
Islam Abdeljawad,
Mamunur Rashid,
Muiz Abu Alia
et al.
Abstract:Conventional banks are ‘indirectly’ allowed to take more risk under the shadow of sovereign guarantees. Banks commit moral hazards as any major banking crisis will be ‘cushioned’ by deposit insurance and bailed out using the taxpayer’s money. This study offers an alternative explanation for the determinants of banks’ credit risk, particularly those from the Islamic regions. Although conventional banks and Islamic banks may share state and social cushioning systems, Islamic banks are strictly prohibited by mora… Show more
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