Creditor rights and bank capital decisions: Conventional vs. Islamic banking

Bitar, Mohammad and Tarazi, Amine,(2019), Creditor rights and bank capital decisions: Conventional vs. Islamic banking. , Journal of Corporate Finance, UNSPECIFIED

[thumbnail of Creditor rights and bank capital decisions Conventional vs. Islamic.pdf] Text
Restricted to Repository staff only

Download (784kB) | Request a copy


Using a sample of banks operating in 24 countries, we provide robust evidence that stronger creditor rights are associated with higher capital adequacy ratios for conventional banks but not for Islamic banks. Such results suggest that, under stronger creditor protection, only the managers of conventional banks increase equity, presumably as a means of signalling better monitoring efforts and of avoiding loss of control. A possible reason for the finding that Islamic banks do not generally increase equity is that, under the profit loss sharing (PLS) principle, depositors share profits and losses with the bank. The role of creditor protection is hence irrelevant in an Islamic banking context. However, we show that in predominantly non-Muslim countries with less competitive markets, Islamic banks show a similar association between creditor rights and capital ratios as conventional banks.
Keywords : Creditor rights, Market power, Religion, Bank capital ratios, Islamic banks, UNSPECIFIED
Journal or Publication Title: Journal of Corporate Finance
Volume: 55
Item Type: Article
Subjects: Ekonomi Islam
Depositing User: Heru Prastyo
Date Deposited: 16 Dec 2019 07:10
Last Modified: 16 Dec 2019 07:10

Actions (login required)

View Item
View Item