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

Karim, Norzitah Abdul; Alhabshi, Syed Musa Syed Jaafar; Kassim, Salina; Haron, Razali

doi:10.1007/978-981-10-6053-3_16

Cited by 10 publications

(15 citation statements)

References 18 publications

(40 reference statements)

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“…Another study of Rodica-Oana (2014) used CAMELS approach to detect the development of the banking system in Romania for the period of pre-crisis before 2007 and post-crisis after 2007; the study concluded that there are cross-sectional effects between the banking indicators that contributed a cautionary signal about the evolution of the banking system. Another similar study of Karim et al (2018), they used all of CAMELS model and Z-score to measure the stability of 50 banks in Malaysia from 1999 to 2015; they found that both Islamic and commercial banks were satisfactorily listed on a general bank solidity scale.…”

Section: Camels Parametersmentioning

confidence: 99%

“…Nevertheless, it has been extended to include the sixth parameter "S" which reflects the bank sensitivity to the deviations in the market (Roman and Ş argu, 2013). This "S" measures the sensitivity to market risks like interest rate, foreign exchange and inflation risk which captures the organization's risk (Gasbarro et al, 2002;Karim et al, 2018). Currently, CAMELS becomes an evaluation tool for bank performance (Roman and Ş argu, 2013).…”

Section: Camels Systemmentioning

confidence: 99%

“…Pure studies on the financial performance and economic growth nexus are limited, most of them have agreed on that there is a link between financial performance of the banking sector Earning is a measure of profitability and there is an assessment of earnings and their level of relationship with peers in which the objective is to evaluate the effect of internally produced funds on the capital of the bank Liquidity (L) Liquidity is the capacity and ability of banks to repay and reimburse short-term obligations Sensitivity to market risk (S) Sensitivity to market risk is the measure of how resilient the assets, liabilities and net worth values of the bank are to changes in market conditions such as rate of interest, foreign exchange and inflation risk Source(s): Retrieved from (Sahut and Mili, 2011;Altan et al, 2014;Peltonen et al, 2015;Munir et al, 2017;Karim et al, 2018) Table 1.…”

Section: Previous Empirical Studiesmentioning

confidence: 99%

“…Return on assets (ROA) ROA ð%Þ ¼ Net income Total assets (Dincer et al, 2011;Wanke et al, 2016;Alqahtani et al, 2017;Karim et al, 2018) Return on equity (ROE) ROE ð%Þ ¼ Net income Equity ( Dincer et al, 2011;Altan et al, 2014;Lahrech et al, 2014;Peltonen et al, 2015;Munir et al, 2017;Karim et al, 2018) Net profit margin (NPM) NPM ð%Þ ¼ Net income Gross income (Altan et al, 2014;Wanke et al, 2016;Karim et al, 2018)…”

Section: Earningsmentioning

confidence: 99%

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Economic growth and financial performance of Islamic banks: a CAMELS approach

Ledhem¹,

Mékidiche²

2020

IES

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PurposeThe purpose of this paper is to investigate the link between the financial performance of Islamic finance and economic growth in all of Malaysia, Indonesia, Brunei, Turkey and Saudi Arabia within the endogenous growth model framework.Design/methodology/approachThis study applied dynamic panel system GMM to estimate the impact of the financial performance of Islamic finance on economic growth using quarterly data (2014:1-2018:4). CAMELS system parameters were employed as variables of the financial performance of Islamic finance and gross domestic product (GDP) as a proxy of economic growth. The sample contained all Islamic banks working in the five countries.FindingsThe findings demonstrated that the only significant factor of the financial performance of Islamic finance, which affects the endogenous economic growth, is profitability through return on equity (ROE). The experimental findings also indicated the necessity of stimulating other financial performance factors of Islamic finance to achieve a significant contribution to economic growth.Practical implicationsThe analysis in this paper would fill the literature gap by investigating the link between financial performance of Islamic finance and economic growth, as this study serves as a guide for the academians, researchers and decision-makers who want to achieve economic growth through stimulating Islamic finance in the banking sector. However, this study may well be extended to investigate the link between the financial performance of Islamic finance and economic growth over the Z-score model as another measure for the financial performance of Islamic finance.Originality/valueThis paper is the first that investigates the link between financial performance of Islamic finance and economic growth empirically using CAMELS parameters within the endogenous growth model to provide robust information about this link based on a sample of the top pioneer Islamic finance countries.

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Section: Camels Parametersmentioning

confidence: 99%

Section: Camels Systemmentioning

confidence: 99%

Section: Previous Empirical Studiesmentioning

confidence: 99%

Section: Earningsmentioning

confidence: 99%

See 2 more Smart Citations

Economic growth and financial performance of Islamic banks: a CAMELS approach

Ledhem¹,

Mékidiche²

2020

IES

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“…Some studies, particularly those conducted in the banking industries have inferred that the Altman Z-Score model {first model and last revised model} is less suitable when it is utilised to evaluate the performance of both commercial and Islamic banks (Rahmat 2002, Endri 2009. Karim et al (2018) conducted a study to analyse the stability of 50 conventional and Islamic banks in Malaysia. They utilised two Z-score tools and CAMEL variables during a period (1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015).…”

Section: Journal Of Public Administration and Governancementioning

confidence: 99%

Z-Score Application for Jordanian Islamic Banks

Qasim¹

2020

JPAG

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This research primarily aims to utilise the Altman model of Z-score to examine the trend performance and predict bankruptcy among three Islamic banks in Jordan for the period of 2010-2016. Furthermore, it also aims to introduce the Z-score model as a beneficial diagnostic technique for possible causes standing behind the bank performance crises. The results of the Z-score model showed that the Jordan Dubai Islamic Bank (JDIB), Jordan Islamic Bank for Finance and Investment (JIBFI), and International Islamic Arabic Banks (IIAB) recorded safe zones in the period of study except for JDIB and IIAB which recorded a Grey zone in 2010, 2011, and 2012 and 2010, 2011, 2012, and 2013, respectively. The implication of this research is important to policymakers, managers, and investors who can use the information to monitor the safest bank among these three Islamic banks in Jordan based on the priority for lending that has to be done in the order of JIBFI, JDIB, and then IIAB. On the other hand, the Z-score was found to be a valid model to examine performance, and ratios utilised in computing the Z-score which was considered to provide workable instrumental indicators as well as being adopted to finance short-term and long-term projects by Jordanian Islamic banks.

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Determinants of the sustainable internationalization and risk‐taking factors in public commercial banks

Ashfaq

Maqbool

Rashid

2021

Journal of Public Affairs

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Banking activities have crossed the border and spread worldwide. Internationalization is known as the need of the day for sustainability in height competitive banking sector trends. Is there any effect of internationalization on profitability to sustain in a competitive market or just increases risk factors? Here, the study investigates the need and effect of internationalization on bank risk in developing country like Pakistan by using seven public commercial banks' quarterly data that are being taken for the duration from2007 to 2016. The study constructs hypotheses to justify the significance or insignificance relation of risk with internationalization variables and some other bank-specific variables that independently affect the risk-taking of internationalized banks. The main variables are Z-score for risk measurement and to evaluate the degree of internationalization. The study used foreign loan ratio and foreign income ratios. To support our work, the study also constructed some control variables like size, income diversification, and listed. We find that internationalization is associated with higher income earning in significant and positive relation with risk.

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

Cited by 10 publications

References 18 publications

Economic growth and financial performance of Islamic banks: a CAMELS approach

Economic growth and financial performance of Islamic banks: a CAMELS approach

Z-Score Application for Jordanian Islamic Banks

Determinants of the sustainable internationalization and risk‐taking factors in public commercial banks

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