Financial Performance Comparison of Islamic and conventional banks in the United Arab Emirates (UAE)

Abstract

This paper examines the financial performance of Islamic and commercial banks in the United Arab Emirates (UAE). The paper gives an empirical insights and comparisons between the performance of Islamic and conventional banking sectors. The sample of the study consists of 5 fully-fledged Islamic banks and 14 conventional banks working in the UAE under the period 2011-2014. The study uses descriptive analysis, correlation, independent sample t test and multiple regression analysis to assess the performance and to compare between both types of banks. The Return on Assets (ROA) is used as proxy for profitability for both types of banks while bank size (log A), liquidity, capital adequacy, financial risk and operating efficiency as proxies for financial performance for both types of banks. The results showed that there is no significant difference between Islamic banks and conventional banks in terms of profitability (ROA) while there is a significant difference between Islamic and conventional banks in terms of liquidity, operation efficiency, capital adequacy, and financial risk. Further, the results indicated that the Islamic banks have higher operating efficiency, bank size and more liquidity than their counterparts of UAE. However, conventional banks are found to have better capital adequacy ratio than Islamic banks. In terms of financial risk, Islamic banks are found to have higher five times than conventional banks which may reflect challenges in the area of risk management in Islamic banks.

Financial Performance Comparison (Empiric Study on Conventional Commercial Banks and Sharia Commercial Banks 2012-2018)

“…This is because the information submitted by the company will be considered by customers and investors (Budiartini, et.al, 2017). Research results that are in accordance with the researcher's hypothesis include research bySolikah et.al ( 2016), Wijayanti (2017), Wahyuni and Efriza (2017), Tabash (2017) and Khan (2017), that there is a difference in BOPO between Conventional Commercial Banks and Islamic Commercial Banks. H4: There is a significant difference between BOPO in Conventional Commercial Banks and Islamic Commercial Banks.…”

Determinants of Profitability: A Case of Commercial Banks in Pakistan

“…Bank profitability is of utmost importance within the current context, and its determinants have been, hence, evaluated and represented in the empirical papers of numerous scholars. Most of the researchers employed both internal and external indicators to determine bank profitability (Abdelaziz et al, 2020; Al-Homaidi et al, 2020; Almaqtari et al, 2019; Jadah et al, 2020; Tabash et al, 2017;Yusgiantoro et al, 2019;Zampara et al, 2017). Ensuing the previous works done in this paper, profitability is taken as an explained variable, whereas internal/bank-specific and external/macroeconomic indicators are employed as explanatory variables.…”

Corporate Governance and Investors’ Decision in Quoted Deposit Money Bank in Nigeria

“…Prusty and Ah-ahdal [89] and Tabash, Yahya and Akhtar [90] opined that profitability is the consistent accomplishment of the financial objectives which a company has set before it. Profitability is a measurement tool used to gauge a firm's overall financial health over a given period of time.…”

“…It assists investors to compare the performance of similar firms across the same industry in choosing where to invest. Tabash et al [90] sees profitability as a measure of the results of a firm's policies and operations in monetary terms. Prusty and Ah-ahdal [89] added that investors are attracted to organizations with good corporate governance because of the belief that that their investment will be protected in such organizations.…”