Efficiency in Islamic vs. conventional banking: The role of capital and liquidity

Bitar, Mohammad and Pukthuanthong, Kuntara and Walker, Thomas,(2019), Efficiency in Islamic vs. conventional banking: The role of capital and liquidity. , Global Finance Journal, UNSPECIFIED

[thumbnail of Efficiency in Islamic vs conventional banking.pdf] Text
Restricted to Repository staff only

Download (904kB) | Request a copy


We show that higher capital and liquidity ratios increase the efficiency of conventional and Islamic banks. Using conditional quantile regressions, we further show that the effect is stronger for highly efficient, small, highly liquid, and highly capitalized conventional banks. We also find that more capitalized and liquid banks were efficient during the 2008/2009 financial crisis and the Arab Spring. Our findings support the view that the constraints imposed by Shari'a law may widen the efficiency gap between the two bank types, at the expense of Islamic banks. Furthermore, our findings suggest that the efficiency of conventional banks not only depends on bank capital and liquidity, but also on the level of bank efficiency while the relationship is in- conclusive for Islamic banks. These findings provide insight into how capital and liquidity can shape bank efficiency. They suggest that higher capital and liquidity buffers serve a constraint on policymakers and may function very differently depending on the level of bank efficiency.
Keywords : Islamic banking Capital; Liquidity; Efficiency; Conditional quantile regressions, UNSPECIFIED
Journal or Publication Title: Global Finance Journal
Item Type: Article
Subjects: Ekonomi Islam
Depositing User: Heru Prastyo
Date Deposited: 16 Dec 2019 06:15
Last Modified: 16 Dec 2019 06:15
URI: https://repofeb.undip.ac.id/id/eprint/185

Actions (login required)

View Item
View Item