Comparative Analysis of Islamic and Conventional Banks Capital Structure Determinants

Comparative Analysis of Islamic and Conventional Banks Capital Structure Determinants
Author: Ben Ukaegbu
Publisher:
Total Pages:
Release: 2014
Genre:
ISBN:
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Over the past few years, Islamic banking has grown tremendously in size and expanded beyond Islamic countries and in some countries its presence has become controversial and intriguing. This paper attempts to evaluate the differences in capital structure determinants between Islamic and conventional banks. Our sample was drawn from banks in MENA for the period of 2005 to 2009, comprising of the largest banks in terms of assets within a country. Using a balanced panel data, we classified the population into four samples of: conventional and Islamic banks; tax-paying and non-tax paying economies. The results indicate some similarities between the capital structure of conventional and Islamic banks, in terms of the pecking order theory. However, the results also indicate that conventional banks were larger in size and more leveraged compared with Islamic banks in non-tax paying economies. The results also showed that conventional and Islamic banks in non-tax paying economies were more profitable than those in tax-paying economies. The findings also showed that GDP has a positive influence on leverage for both sets of banks in non-tax paying economies with a negative influence on conventional banks in tax-paying economies. The paper provides additional contribution to the growing literature on capital structure determinants and in particular Islamic banks demonstrating that the proportion of equity in Islamic banks is much higher than in conventional banks with implications to risk.

Capital Structure and Shari’ah Compliance of non-Financial Firms

Capital Structure and Shari’ah Compliance of non-Financial Firms
Author: Ramazan Yildirim
Publisher: Walter de Gruyter GmbH & Co KG
Total Pages: 323
Release: 2021-03-22
Genre: Business & Economics
ISBN: 3110713713
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In the present financial world, various niche markets play an increasingly important role. One of the fastest-growing niches is, without a doubt, Islamic finance. Indeed, sustainable finance needs constantly evolving innovations, and this book offers valuable insights into Islamic capital structure and Shari’ah equity screening enriching academic discourse. "In recent years, we have witnessed the emergence of a new generation of academics and professionals specializing in various aspects of Islamic finance as knowledge and practice. This has brought about a new dynamism and also further sophistication. This book is one of such contributions, as it develops knowledge which is then transformed into practice whereby practical impact is also achieved. Being an academic book, it provokes readers’ thoughts, offering a critique of the implications of the currently applied Shari’ah screenings methodologies. As a transformative practical piece, by developing an innovative screening ratio, in this book, Dr. Yildirim extends his focus on the risk-sharing based financing hierarchy, covers thoughts and the underlying philosophy, and proposes an Islamic version of a pecking order hierarchy. This framework can be considered the foundation for developing an Islamic capital structure theory. This book will benefit academics, professionals, investors, as well as policymakers working in the Islamic finance industry and would like to explore more." (Professor Dr. Mehmet Asutay, Durham University Business School, UK) "This book offers, for the first time after the inception of Shari’ah screening methodologies, a groundbreaking new stock screening solution that is comprehensible, practical, and foremost entirely derived from the primary sources of Islam (Qur’an and Sunnah). Congratulations to Dr. Ramazan for his outstanding contribution to Islamic finance and capital markets." (Associate Professor Dr. Ahcene Lahsasna) "This excellent book is a must-have for all corporate finance students/researchers interested in the theoretical aspect of capital structure and the religious discussion of Shari’ah equity screening. This book should become a companion to those involved in a quantitative research environment and aim to conduct a comparative analysis; an ideal resource for everyone, from Shari’ah scholars to Islamic finance practitioners and beginners to experts." (Professor Dr. M. Kabir Hassan, University of New Orleans, USA)

Capital Structure Determinants of MENA Banks

Capital Structure Determinants of MENA Banks
Author: Iliya Komarev
Publisher:
Total Pages: 30
Release: 2019
Genre:
ISBN:
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This study tests theoretical predictions about capital structure determinants in the rarely explored context of Middle Eastern and North African (MENA) banks. Differences in capital structure decisions between Islamic and conventional banks are also examined. We use a panel 116 banks over the post-crisis period, 2011-2015. The baseline results show that total and short-term debt ratios are positively affected by the bank's size and growth rate but negatively affected by its profitability and liquidity. Conversely, the long-term debt ratio is negatively affected by the bank's size and growth rate. However, the dynamic Arellano-Bond estimations suggest that current year debt ratios are mainly explained by their prior year (target) levels, and many traditional capital structure determinants, except growth rate and profitability, are weak. Moreover, Islamic banks seem to maintain similar capital structure as conventional banks but have their financing decisions affected by different determinants.

The Effects of the Global Crisis on Islamic and Conventional Banks

The Effects of the Global Crisis on Islamic and Conventional Banks
Author: Jemma Dridi
Publisher:
Total Pages: 42
Release: 2005-10-31
Genre:
ISBN: 9781455205318
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This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by looking at the impact of the crisis on profitability, credit and asset growth, and external ratings in a group of countries where the two types of banks have significant market share. Our analysis suggests that IBs have been affected differently than CBs. Factors related to IBs‘ business model helped limit the adverse impact on profitability in 2008, while weaknesses in risk management practices in some IBs led to a larger decline in profitability in 2009 compared to CBs. IBs‘ credit and asset growth performed better than did that of CBs in 2008-09, contributing to financial and economic stability. External rating agencies‘ re-assessment of IBs‘ risk was generally more favorable.

Islamic Accounting And Finance: A Handbook

Islamic Accounting And Finance: A Handbook
Author: Khaled Hussainey
Publisher: World Scientific
Total Pages: 882
Release: 2023-03-23
Genre: Business & Economics
ISBN: 1800612435
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Islamic finance is one of the fastest-growing sectors in international banking and finance. Owing to the increasing availability and ease of access to Islamic services, Islamic finance has become increasingly important not only in Muslim countries, but around the world, making it a global industry. Under the Gulf Cooperation Council (GCC) as well as in some regions, such as the Middle East and North Africa, a dual financial system is implemented, where Sharia-compliant products are marketed alongside conventional financial systems.In this thoroughly researched collection of chapters, researchers from around the world examine the role of Islamic finance in the economies and prospects of different companies. They discuss Islamic finance literature from both theoretical and empirical perspectives. The theoretical section of the book consists of conceptual chapters that enable readers to critically evaluate and expand their understanding of accounting and finance. The chapters in the empirical section of this handbook discuss and interpret empirical evidence to provide clear implications for practice, research, and society. This section bridges the gap between theory and practice and offers suggestions for future research. Islamic Accounting and Finance is geared towards scholars and students, but it is also of use to banking and finance practitioners.

Islamic Corporate Finance

Islamic Corporate Finance
Author: M. Kabir Hassan
Publisher: Routledge
Total Pages: 210
Release: 2019-06-04
Genre: Business & Economics
ISBN: 1351061496
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Most existing texts covering topics in Islamic finance discuss the potential of Islamic banking; very few talk about other forms of financing and the investment activities of Islamic firms from the standpoint of owners and managers. This book fills this gap by looking at the traditional as well as non-traditional financing and investment activities of shariah-compliant companies. The chapters in this edited text offer a full range of topics on corporate finance for Islamic firms, including global comparisons of shariah screening, dividend policy and capital structure of Islamic firms, details of global Islamic equity markets, trends and performance of sukuk markets, and a brief account of derivative securities that can be used in Islamic finance. This is a useful reference for anyone who wishes to learn more about the performance of shariah-compliant companies vis-à-vis conventional firms. The book includes both technical and non-technical information that would be suitable for classroom teaching as well as a reference for postgraduate research students.

Capital Structure and Performance of Islamic Banks

Capital Structure and Performance of Islamic Banks
Author: Lama Tarek al-Kayed
Publisher:
Total Pages: 78
Release: 2012
Genre:
ISBN:
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As new comers to the market, Islamic Banks (IBs) are facing a trade-off. They can either employ high capital ratios which increase the soundness and safety of the bank and lowers the required return (risk) by investors, or depend on deposits and Islamic bonds which are considered cheaper sources of funds due to their tax deductibility. IBs' management must carefully decide upon the appropriate mix of debt and equity, namely, capital structure, in order to maximize the value of the bank. This study examines the effect of capital structure on IBs' performance in an attempt to provide guidance to managers in the issue of raising capital. The study also examines whether regulatory capital requirements are the first-order determinants of IBs' capital decisions. Furthermore, the study calculates the optimal capital structure for the sample IBs and uses it as guidance for capital structure decisions. Using a sample of 85 IBs covering 19 banking systems, the study uses a Two-Stage Least Squares (2SLS) method to examine the performance determinants of IBs' in order to control for the reverse causality from performance to capital structure and uses the Ordinary Least Squares (OLS) method to examine the determinants of IBs' capital structure. After controlling for macroeconomic environment, financial market structure and taxation, results indicate that IBs' performance (profitability) measures respond positively to increases in equity (capital ratio). The result is consistent with the signaling theory which predicts that banks expected to have better performance credibly transmit this information through higher capital. As for the reverse causation from performance to capital structure, results indicate that more profitable IBs employ higher leverage. This is consistent with the efficiency-risk hypothesis which predicts that more profitable firms choose lower equity ratios (higher leverage). Risk is found to be an insignificant factor in determining leverage, which indicates that minimum capital requirements are not first-order determinants of IBs' capital structure and that standard determinants of capital structure can explain variation in IBs' book capital. Results of optimal capital structure finds that the capital-asset ratio has an increasing effect on IBs' profitability. The optimal capital ratio is found to be 37.41%. At capital ratios below 37.41% equity is expensive and has a negative effect on return on equity (ROE) due to the higher required return by investors. Beyond 37.41% equity starts to have a positive effect on ROE and becomes a cheap source of financing. As a general guide, IBs should have minimum capital ratios of 37.41% to be viewed as safe and sound by investors and to lower the cost of issuing additional equity.

A Comparative Analysis of Non-Performing Financing in Islamic and Conventional Banks of Pakistan

A Comparative Analysis of Non-Performing Financing in Islamic and Conventional Banks of Pakistan
Author: Haroon ur Rasheed
Publisher:
Total Pages: 35
Release: 2019
Genre:
ISBN:
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This paper seeks to identify the determinants of the non-performing loans of conventional banking and non-performing financing of the Islamic industry. Data of ten (10) year i.e. from 2008 to 2017 of Eight (8) conventional banks and four (4) Islamic banks were taken. The methods of' T test' was conducted to ascertain the difference in means of non-performing portfolios, whereas Multiple Regression Analysis using panel data was done to assess the relationship of critical variables with non-performing portfolios of both set of banks. The results suggests that the non-performing loans of conventional banks are greater than non-performing financing of Islamic banks of Pakistan. Moreover, in line with expectation, loan volume have positive effect. However, financing volume-the counterpart of load volume- have negative but more significant effect. Number of branches have inverse but insignificant effect on non-performing portfolios of both set of banks. Another interesting findings is that the staff strength is having negative and significant impact on non-performing portfolios loans whereas in case of Islamic banks, this effect is positive and significant. This might suggest that lack of staff is enforcing the Islamic banks to utilize the services of existing human resource who have conventional banking experience which may result in increasing of non-performing financings of Islamic banks. Furthermore, the relationship of capital adequacy ratio of Islamic banks is inversely and significantly related to non-performing financing of Islamic bank, whereas this relationship is directly and significantly related to non-performing loans of conventional banks. The effect of interest income on Non-performing loan/ Financing was found to be positive as expected however insignificant in case of Islamic banks. This further suggested that conventional lending system is effected by adverse selection problem while Islamic banks having unique asset back position transfer mechanism effectively mitigate that problem. Overall finding suggests that there are significant structural differences between interest base lending and asset backed financing of Islamic banks, the latter being more stable due to lack of adverse selection and moral hazard problems that arise due to interest base lending. Secondly, institutions, learning centers and skill development centers should be established to provide skilled human resources to Islamic banking and finance industry of Pakistan.

Department 19

Department 19
Author: Will Hill
Publisher: Penguin
Total Pages: 369
Release: 2011-03-31
Genre: Young Adult Fiction
ISBN: 1101513500
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Jamie Carpenter's father is dead, his mother is missing, and he was just rescued by an enormous creature named Frankenstein. Now Jamie is pulled into a secret organization responsible for policing the supernatural, founded more than a century ago by Abraham Van Helsing. . . . Department Nineteen takes us through history, across Europe, and beyond - from the cobbled streets of Victorian London to prohibition-era New York, from the icy wastes of Arctic Russia to the treacherous mountains of Transylvania. Part modern thriller, part classic horror, it's packed with mystery, mayhem, and a level of suspense that makes a Darren Shan novel look like a romantic comedy.