Financing structure and insolvency risk exposure of Islamic banks

Abdul-Rahman, Aisyah

doi:10.1007/s11408-010-0142-x

Cited by 14 publications

(17 citation statements)

References 46 publications

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“…Muslims always reminded to invest only in permitted (halal) and leaving the forbidden (haram). Rahman (2010) analyses the impact of financing structure on Islamic banks' insolvency risk exposure. He finds that an increase in real estate financing decreases insolvency risk.…”

Section: Authorsmentioning

confidence: 99%

Islamic Financial Institutions and Real Estate Cycle

Harun

Wahab

Yusof

2018

IPJAF

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The role of Islamic financial intuitions is essential in providing Islamic financing specifically to investors and stakeholders to invest in real estate. Therefore, understanding the link of the real estate cycle to the financial institutions is crucial. This is because the real estate cycle is one of the critical elements that will affect financing decisions and strategies of the banking sectors. Hence, this paper employed meta-analysis which aims (1) to systematically review survey the growing literature on real estate cycle and its links to the financial institutions; (2) to highlight possible cross-country trend analysis financial strategy among investors in dealing in with the real estate cycle. The results of the study suggest that during the peak cycle or period of crisis, most investors are risk-averse and increase the risk to the financing of real estate as well. This real estate cycle that occurs almost every 10 years in conventional real estate sectors also give some consequences to the Islamic financial institutions. This paper suggests to investors to understand the real estate cycle and its impact on Islamic financial institutions.

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Section: Authorsmentioning

confidence: 99%

Islamic Financial Institutions and Real Estate Cycle

Harun

Wahab

Yusof

2018

IPJAF

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“…the probability that the value of its assets will become lower than the value of the debt which means that higher Z-score corresponds to a lower risk of insolvency (Rajhi and Hassairi 2013). Due to the recent global financial crisis, it has become a great interest and draws enormous attention to the bank insolvency risk (Rahman 2010); thus, the Z-score has become important than ever (Strobel 2011). Rahman (2010) in her research noted that financing structures of the banks affect the risk exposure, bank's profitability, capital structure decisions, degree of risk tolerance and economic performance.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Due to the recent global financial crisis, it has become a great interest and draws enormous attention to the bank insolvency risk (Rahman 2010); thus, the Z-score has become important than ever (Strobel 2011). Rahman (2010) in her research noted that financing structures of the banks affect the risk exposure, bank's profitability, capital structure decisions, degree of risk tolerance and economic performance. According to Rahman (2010), there are three methods of measuring risks namely Z-score, CAPM risk measures and Zrisk index.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Rahman (2010) in her research noted that financing structures of the banks affect the risk exposure, bank's profitability, capital structure decisions, degree of risk tolerance and economic performance. According to Rahman (2010), there are three methods of measuring risks namely Z-score, CAPM risk measures and Zrisk index. Rahman (2010) in her research used Zrisk index with the rationale that it is the most appropriate because Malaysian Islamic banks are relatively small and not publicly traded on the stock exchange.…”

Section: Literature Reviewmentioning

confidence: 99%

“…According to Rahman (2010), there are three methods of measuring risks namely Z-score, CAPM risk measures and Zrisk index. Rahman (2010) in her research used Zrisk index with the rationale that it is the most appropriate because Malaysian Islamic banks are relatively small and not publicly traded on the stock exchange. Rahman (2010) extended the work by Hannan and Hanweck (1988) where Zrisk is calculated as E(ROA) + CAP/rROA, where E(ROA) is the expected return on assets, CAP is the ratio of equity capital to total assets, and rROA is the standard deviation of ROA.…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Measuring Bank Stability: A Comparative Analysis Between Islamic and Conventional Banks in Malaysia

Karim

Alhabshi

Kassim

et al. 2017

Proceedings of the 2nd Advances in Business Research International Conference

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The present study provides new empirical evidence of bank stability measures for 50 banks in Malaysia, for a period from 1999 to 2015. There are two methods of measuring bank stability that is using Z-score and CAMELS variables. After calculating, these variables are ranked, with the highest average is ranked as one, and the lowest average is ranked last, or fifty. This is following the method by (Roman and Procedia Economics and Finance, 6(13), 703-712 Roman and Şargu 2013) and (Procedia-Social and Behavioral Sciences, 24, 1530-1545Dincer et al. 2011) and extending it by introducing the average of total ranking for all variables. The empirical findings suggest that both local Islamic and conventional banks are ranked favourable in overall average bank stability score, sensitivity to market risk, asset quality, earning and profitability, but local conventional banks are recorded favourable ranking in liquidity. Comparing the two types of local banks, conventional banks are ranked better in liquidity, sensitivity to market risk and earning and profitability.

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How strong are the causal relationships between Islamic stock markets and conventional financial systems? Evidence from linear and nonlinear tests

Ajmi

Hammoudeh

Nguyen

et al. 2014

Journal of International Financial Markets, Institutions and Mo

199

106

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Past studies suggest that the Islamic …nance system is only weakly linked or even decoupled from conventional markets. If this statement is true, then this system may provide a cushion against potential losses resulting from probable future …nancial crises. In this article, we make use of heteroscedasticity-robust linear Granger causality and nonlinear Granger causality tests to examine the links between the Islamic and global conventional stock markets, and between the Islamic stock market and several global economic and …nancial shocks. Our …ndings reveal evidence of signi…cant linear and nonlinear causality between the Islamic and conventional stock markets but more strongly from the Islamic stock market to the other markets. They also show potent causality between the Islamic stock market and …nancial and risk factors. This evidence leads to the rejection of the hypothesis of decoupling of the Islamic market from their conventional counterparts, thereby reduces the portfolio bene…ts from diversi…cation with Sharia-based markets. A striking result shows a connection between the Islamic stock market and interest rates and interestbearing securities, which is inconsistent with the Sharia rules. The results also suggest that modeling Islamic stock markets should be done within a nonlinear VAR system and not through a regression equation.

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Financing structure and insolvency risk exposure of Islamic banks

Abstract: Insolvency risk, Banking, Financing structure, E5, G21, G28,

Cited by 14 publications

References 46 publications

Islamic Financial Institutions and Real Estate Cycle

Islamic Financial Institutions and Real Estate Cycle

Measuring Bank Stability: A Comparative Analysis Between Islamic and Conventional Banks in Malaysia

How strong are the causal relationships between Islamic stock markets and conventional financial systems? Evidence from linear and nonlinear tests

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