Empirical evidence on the risk management tools practised in Islamic and conventional banks

Abstract

Purpose -The paper aims to gain an insight into the risk management tools practised in Islamic and commercial banks in Malaysia, and selected Islamic banks outside Malaysia. The study also examines the level of adequacy of risk management tools and systems of these banks. Design/methodology/approach -The study employs primary data collected using a questionnaire survey. Findings -There are significant differences in the level of extensiveness of the usage of market value at risk (VaR), usage of stress testing results, the usage of credit risk mitigation methods and also the level of extensiveness of the usage of operational risk management tools between Islamic and conventional banks. The findings further show that risk management tools and systems for Islamic banking are inadequate, particularly in the critical areas of "IT professionals with relevant expertise in process integration and risk analytics", "IT systems to cater for each Islamic instrument" and also the "capacity of human capital in the highly technical areas of risk measurement." This implies that more innovations and product developments are needed for Islamic banking in managing risks. Originality/value -Since there are relatively few studies conducted in this area, specifically among Islamic banks in Malaysia, this study will broaden the scope of the literature by providing novel empirical evidence.

Corporate Risk Disclosure and Business Performance: Does Board Gender Diversity Matters?

“…Furthermore, Oliveira, Rodrigues, and Craig, (2011) have proved that risk disclosure helps an organization to stabilize its operational system, market discipline effectiveness as well as sustaining the social support of the company's stakeholders. An effective risk disclosure is needed to enhance the continuous business growth and profitability (Hanim, Abdul &Omar, 2011). https://doi.org/10.15405/epsbs.2019.08.25 Corresponding Author: Fathyah Hashim Selection andpeer-review under responsibility of the Organizing Committee of the conference eISSN: 251 Risk disclosure research is widely discussed in the developed countries, yet, an interesting question is that do risk governance as important to the developing countries also (Nahar et al, 2016).…”

“…Amran et al (2008) also proved that the stakeholders preferred the risk information to be published and disclosed in timely basis. An effective risk disclosure is needed to enhance the continuous business growth and profitability (Hanim et al, 2011). Therefore, it can be concluded that a good risk reporting and disclosure practice can lead to the better business performance of https://doi.org/10.15405/epsbs.2019.08.25 Corresponding Author: Fathyah Hashim Selection and peer-review under responsibility of the Organizing Committee of the conference eISSN: 2357-1330 256 an organization according to the researchers.…”

Exploring Liquidity Risk and Interest-Rate Risk: Implications for Profitability and Firm Value in Nigerian Banks

“…Additionally, the return on equity (ROE) is measured by net income over total equity of banks. The return on equity assess the financial return of a shareholder's investment and indicates how well a firm uses shareholders fund to generate profit (Tafri et al, 2011;Alper & Anbar, 2011;Saeed, 2013).…”

“…Usually, bank size is often measured by using natural log total assets and is used as a control variable in this study (Tafri et al, 2009;Akhtar et al, 2010;Athanasoglou, Brissimis, & Delis, 2008;Tafri et al, 2011;How et al, 2005). In most cases, bank size is generally used to capture potential economies or diseconomies of scale.…”

“…Favourable economic growth in any country spurs households' income and other businesses and the direction of economic progress is as a result of growth in GDP. The effect of economic environment on banks financial performance is usually controlled by employing the growth as the macroeconomic variable as used by (Tafri et al, 2011;Dumicic & Ridzak, 2013;Sinha & Sharma, 2016). Proxy by GDP growth, it is expected to have a positive relationship with bank profitability and firm value Furthermore, the inflation rate (consumer price index) is used in this study as a control variable.…”