The drivers of financial vulnerability and profitability: evidence from conventional and Islamic banks in Islamic finance-oriented countries

Parmankulova, Indira; Issakhova, Parida; Zhanabayeva, Zhanar; Faizulayev, Alimshan; Orazymbetova, Kulzira

doi:10.1108/jiabr-06-2021-0155

Cited by 10 publications

(10 citation statements)

References 52 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Likely, a larger position in financial vulnerability risk results in greater bank profitability. This finding is in line with Parmankulova et al (2022), who investigated the drivers of financial vulnerability in QISMUT+3 countries. We find improvement in efficiency management to reduce financial vulnerability risk for both.…”

Section: Empirical Findingssupporting

confidence: 90%

Does social and governmental responsibility matter for financial stability and bank profitability? Evidence from commercial and Islamic banks

Kanapiyanova

Faizulayev

Ruzanov

et al. 2022

JIABR

Self Cite

View full text Add to dashboard Cite

Purpose This paper aims to explore the drivers of banking stability in the case of QISMUT+3 countries (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain) focusing on social and governmental responsibility (SGR) determinants. Both main indicators of banking stability, namely, profitability and nonperforming loans, were treated as dependent variables. The model is examined with the whole sample and separately by examining commercial banks and Islamic banks. Design/methodology/approach Cross-country bank-level panel data spanning from 2011 to 2018 is used. Two-step system generalized methods of moments alongside both panel-corrected standard error and feasible generalized least squares models were applied to ensure the robustness of the results. Findings Findings reveal that capital adequacy and corruption control are the most dominant determinants of banking profitability in the studied sample regardless of the type of the bank. In addition, profitability, efficient management, inflation and government effectiveness were found to be the main drivers of financial vulnerability risk. Practical implications Findings of this study offer many insights and policy implications to help stakeholders gain a comprehensive understanding of banking stability. Suggested policy implications targeting bank management, governmental policymakers and investors are offered to better the banking stability of QISMUT+3 countries. Originality/value This paper has multiple contributions to the existing literature. The determinants of banking stability are examined in QISMUT+3 group of countries which is the focus of a limited number of studies. In addition, the use of a comprehensive variable set alongside the addition of SGR determinants in the case of banking system stability is one of the main contributions of this paper.

show abstract

Section: Empirical Findingssupporting

confidence: 90%

Does social and governmental responsibility matter for financial stability and bank profitability? Evidence from commercial and Islamic banks

Kanapiyanova

Faizulayev

Ruzanov

et al. 2022

JIABR

Self Cite

View full text Add to dashboard Cite

show abstract

“…At the same time, "profitability, efficient management, inflation and government effectiveness are found to be the main drivers of financial vulnerability risk" (p. 1). Furthermore, Parmankulova et al (2022) suggest that financial vulnerability and profitability affect each other for both types of banks. In addition, the capital adequacy ratio is positively associated with both bank profitability and non-performing loans (NPLs), while corruption control has the expected sign.…”

Section: The Risk-taking Behavior and Stability Of Conventional Banksmentioning

confidence: 99%

Banking system stability in the MENA region: the impact of market power and capital requirements on banks’ risk-taking behavior

Mateev

Nasr

2023

IMEFM

View full text Add to dashboard Cite

Purpose This paper aims to investigate the impact of capital requirements and bank competition on banks' risk-taking behavior in the Middle East and North Africa (MENA) region. Design/methodology/approach The study combines both descriptive and analytical approaches. It considers panel data sets and adopts panel data econometric techniques like fixed effects/random effects and generalized method of moments estimator. Findings Regulatory capital and market competition have different effects according to the bank’s type (Islamic or conventional). The results show that the capital adequacy ratio has a significant impact on the credit risk of conventional banks (CBs) while this effect is irrelevant for Islamic banks (IBs). However, market competition plays a significant role in shaping risk-taking behavior of Islamic banking institutions. Our results indicate that banks with strong market power may pursue risky strategies in the face of increased regulatory pressure (e.g. increased minimum capital requirements). The results were robust to alternative profitability measures and endogeneity checks. Research limitations/implications The most important limitation is the lack of data for some banks and years, and this paper had to exclude some variables because of missing observations. The second limitation concerns the number of IBs in the sample. However, this can be overcome by including more countries from MENA and other regions where Islamic banking is a growing phenomenon. Practical implications Our findings call for a change in Islamic banking’s traditional business model based on the prohibition of interest. The analysis indicates that market concentration moderates the association between capital requirements and the insolvency risk of IBs but not CBs. Therefore, regulatory authorities concerned with improving financial stability in the MENA region should set up their policies differently depending on the level of banking market concentration. Finally, bank managers are requested to apply a more disciplined approach to their lending decisions and build sufficient capital conservation buffers to limit the impact of downside risk from the depletion of capital buffers during the pandemic. Originality/value This study addresses banks’ risk-taking behavior and stability in the MENA region, which includes banks of different types (Islamic and conventional). This paper also contributes to the literature on bank stability by identifying the most critical factors that affect bank risk and stability in the MENA region, which can be relevant in the context of the new global (COVID-19) crisis.

show abstract

“…Size (LTA): The total asset logarithm was employed as a stand-in for size. According to the economies of scale paradigm, large companies will profit from growing their business by lowering their manufacturing costs (Stigler, 1958;Driffield et al, 2005;Parmankulova et al, 2022). LTA is therefore anticipated to have a favorable effect on the financial viability of businesses.…”

Section: Independent Firm-specific Variablesmentioning

confidence: 99%

Fueling Financial Sustainability in Emerging Markets: An Investigation of ESG Public Policy and Other Determinants in the Oil and Gas Industry through Effective Financial Planning

Aizada,

Saule,

Parida

et al. 2023

IJEEP

View full text Add to dashboard Cite

This article's major goal is to pinpoint the variables that affect the capital structure and financial viability of the oil and gas sector in the regions that make up the Eurasian Economic Union. Data on oil and gas businesses in the Eurasian Union from 2012 to 2020 were gathered using the Orbis Database. All currently operating businesses with recent financial data were painstakingly obtained. 2,757 businesses with pertinent financial data in total were gathered. It includes a broad variety of oil and gas firms that have so far been the subject of inquiry. The results show that firm-specific factors are very important in determining the financial viability of oil and gas enterprises in the EUEA regions. For instance, both size and tax policy matter in driving the financial sustainability and leverage of companies. Furthermore, in contrast to CAPSTR, the oil price has had an enormous positive impact on the financial sustainability of oil and gas companies in EAEU regions. The results illustrate that ESG factors substantially affect financial sustainability in a negative way. The results show that oil and gas businesses use cutting-edge, environmentally friendly technologies in accordance with ESG Public Policy. Managers should continue to improve their strategies based on the growth of their businesses by utilizing new cutting-edge environmentally friendly technologies that will be suitable for stringent ESG Public Policy regulations. Overall results indicate that managers and practitioners should work on new strategies for expansion and penetration into the new markets in the EUEA regions.

show abstract

The drivers of financial vulnerability and profitability: evidence from conventional and Islamic banks in Islamic finance-oriented countries

Cited by 10 publications

References 52 publications

Does social and governmental responsibility matter for financial stability and bank profitability? Evidence from commercial and Islamic banks

Does social and governmental responsibility matter for financial stability and bank profitability? Evidence from commercial and Islamic banks

Banking system stability in the MENA region: the impact of market power and capital requirements on banks’ risk-taking behavior

Fueling Financial Sustainability in Emerging Markets: An Investigation of ESG Public Policy and Other Determinants in the Oil and Gas Industry through Effective Financial Planning

Contact Info

Product

Resources

About