PROFITABILITY AND STABILITY OF BANKS: A COMPARATIVE STUDY OF ISLAMIC AND CONVENTIONAL BANKS IN MENA REGION

Authors

  • Maryam Saeed Hammad
  • Shabir Hakim
  • Shabbir Ahmad

Abstract

The profitability and stability are the two main objectives of all financial institutions, particularly for the banks. An understanding of the drivers of the profitability and stability will enable banks to achieve these objectives effectively. This study aims to investigate and compare the determinants of the profitability and stability of Islamic and conventional banks in MENA region over the period of 2011 to 2017. In addition, this study aims at identifying the differences in the profitability and stability of banks in MENA region. Two profitability measures used are the return on asset (ROA) and the return on equity (ROE), and the stability measure used is the Z-score. Generalized method of moments was applied to test the models of study using a balanced panel data set of 714 observations, obtained from the cross-section of 31 Islamic banks and 71 conventional banks over a seven-year period. The findings of the study indicated that the determinants of the profitability and stability of banks in MENA region vary according to the bank type, Islamic or conventional, and the location in GCC and non-GCC countries. Furthermore, the results revealed that there is a significant difference in the impact of most of the bank-specific variables on the profitability and stability of banks with respect to the bank type. The Islamic banks in MENA region are less profitable than conventional banks when the profitability was measured by ROA. In addition, the Islamic banks in MENA region were found to be less stable than the conventional banks.

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Published

2021-04-27

How to Cite

Maryam Saeed Hammad, Shabir Hakim, & Shabbir Ahmad. (2021). PROFITABILITY AND STABILITY OF BANKS: A COMPARATIVE STUDY OF ISLAMIC AND CONVENTIONAL BANKS IN MENA REGION. PalArch’s Journal of Archaeology of Egypt / Egyptology, 18(12), 323-335. Retrieved from https://archives.palarch.nl/index.php/jae/article/view/7885