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Bank Financing and Firm Growth: The Role of Islamic Bank Financing

Author

Listed:
  • Mahmoud Al-Rdaydeh

    (Department of Business Administration, Ibn Rushd College for Management Sciences, Abha, Saudi Arabia,)

  • Joriah Muhammad

    (School of Management, Universiti Sains Malaysia, Penang, Malaysia.)

  • Haslindar Ibrahim

    (School of Management, Universiti Sains Malaysia, Penang, Malaysia.)

Abstract

The study examined the influence of Islamic and/or conventional bank financing on the growth of firms. The data were based on 113 firms in a Middle East country Jordan that implemented a dual-banking system from 2007 to 2016. The finding revealed that the implementation of either type of bank financing, be it Islamic and/or conventional, affect the growth of the firms. The study observed that Islamic bank financing had a more significant effect on the growth of the firms. Following the results of this study, stakeholders, managers, and investors are expected to change their views on Islamic bank financing, which is currently viewed as a part of religious practice. It may lead to the utilization of Islamic bank financing by firms. It should be noted that this study is one of the first empirical studies on the impact of Islamic bank financing on the growth of firms.

Suggested Citation

  • Mahmoud Al-Rdaydeh & Joriah Muhammad & Haslindar Ibrahim, 2019. "Bank Financing and Firm Growth: The Role of Islamic Bank Financing," International Journal of Economics and Financial Issues, Econjournals, vol. 9(4), pages 181-188.
    • Handle: RePEc:eco:journ1:2019-04-21
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    References listed on IDEAS

    as
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    4. Mahmoud Al-Rdaydeh & Ammar Yaser Almansour & Mohammad Ahmad Al-Omari, 2018. "Moderating effect of competitive strategies on the relation between financial leverage and firm performance: evidence from Jordan," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 626-641, June.
    5. Aggarwal, Rajesh K & Yousef, Tarik, 2000. "Islamic Banks and Investment Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 93-120, February.
    6. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
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    Cited by:

    1. Purwanto Purwanto & Isnain Bustaram & Subhan Subhan & Zef Risal, 2020. "The Effect of Good Corporate Governance on Financial Performance in Conventional and Islamic Banks: An Empirical Studies in Indonesia," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 1-6.

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    More about this item

    Keywords

    interest-free credit facility; Islamic finance; conventional loan; firm growth; panel data.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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