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Islamic Banks Financial Performance and Implications of Basel III Standards in the GCC: An Empirical Analysis

Author

Listed:
  • Osama M. Al-Hares (Correspondnce author)

    (Faculty of Business - University of Wollongong in Dubai Knowledge Park, P.O. Box 20183, Dubai, UAE)

  • Kashif Saleem

    (Faculty of Business - University of Wollongong in Dubai Knowledge Park, P.O. Box 20183, Dubai, UAE)

Abstract

This study empirically evaluates Islamic banks financial performance and implications of Basel III regulations in the Gulf Cooperation Council (GCC) region. We utilize bank-level data for 24 Islamic Banks based in six GCC countries (namely, Kuwait, United Arab Emirates, Kingdom of Saudi Arabia, Oman, Qatar, and Bahrain) for the period of 2006 to 2015. Financial performance is measured by using both Internal¨Cbased performance measure (Return on Assets) and Marketbased performance measure (Tobin¡¯s Q model). We employ regression analysis to capture the impact of bank size, credit risk, operational efficiency and asset management on performance measured by the two indicators. Moreover, to control for the implications of Basel III standards, we run our model with a dummy ¡®control¡¯ variable. The results reveal that the explanatory power of the internal¨Cbased performance model is higher than the market-based performance model. Not surprisingly, the results also indicate that financial performance of GCC Islamic banks is highly sensitive to Basel III regulations. We argue that findings of this study highly useful for capitalmarket participants who are interested in Islamic banking industry, in particular, GCC region.

Suggested Citation

  • Osama M. Al-Hares (Correspondnce author) & Kashif Saleem, 2017. "Islamic Banks Financial Performance and Implications of Basel III Standards in the GCC: An Empirical Analysis," Review of Economics & Finance, Better Advances Press, Canada, vol. 7, pages 80-97, February.
    • Handle: RePEc:bap:journl:170106
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    References listed on IDEAS

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    Cited by:

    1. Sitara Bibi & Fatima Mazhar, 2019. "Determinants of Banks Profitability & Liquidity and the Role of BASEL III in Islamic & Conventional Banking Sector of Pakistan: A Case Study of NBP," The Economics and Finance Letters, Conscientia Beam, vol. 6(1), pages 40-56.
    2. Francesco Campanella & Luana Serino, 2019. "Firms Use of Financial Leverage: Evidence from Italy," Review of Economics & Finance, Better Advances Press, Canada, vol. 17, pages 65-78, August.

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    More about this item

    Keywords

    Gulf Cooperation Council (GCC); Islamic banks; Basel III standards; Tobin¡¯s Q Model;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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