Advanced Search
MyIDEAS: Login to save this article or follow this journal

Impact of financial shocks on Islamic banks: Malaysian evidence during 1997 and 2007 financial crises

Contents:

Author Info

  • Salina H. Kassim
  • M. Shabri Abd. Majid

Abstract

Purpose – The purpose of this paper is to provide empirical evidences on the impact of financial shocks on the Islamic banks vis-a-vis the conventional banks. Based on the Malaysian experience over two major financial crises, namely the 1997 Asian financial crisis and 2007 financial crisis, the study aims to test the validity of the proposition that the Islamic banks are more resilient to the financial shocks compared to the conventional banks. Design/methodology/approach – Focusing on the Malaysian data covering three sub-periods, namely, the 1997 Asian financial crisis period (July 1997-September 1999), the non-crisis period (October 1999-June 2007) and the 2007 financial crisis period (July 2007-September 2009), the study employs the impulse response functions and variance decomposition analysis based on the vector auto-regression (VAR) method. Findings – The results indicate that both the Islamic and conventional banking systems are vulnerable to financial shocks. This is contrary to the popular belief that the Islamic financial system is sheltered from the financial shocks due to its interest-free nature. Research limitations/implications – The results of this study have important implications for the risk management practices of both the Islamic and conventional banks. Originality/value – This paper contributes in providing the empirical evidence on the impact of financial shocks on the Islamic banks. To the authors' knowledge, there have been no studies comparing of the impacts of the two major financial crises on the Islamic banking sector.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.emeraldinsight.com/journals.htm?issn=1753-8394&volume=3&issue=4&articleid=1896482&show=abstract
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Emerald Group Publishing in its journal International Journal of Islamic and Middle Eastern Finance and Management.

Volume (Year): 3 (2010)
Issue (Month): 4 (November)
Pages: 291-305

as in new window
Handle: RePEc:eme:imefpp:v:3:y:2010:i:4:p:291-305

Contact details of provider:
Web page: http://www.emeraldinsight.com

Order Information:
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Email:
Web: http://www.emeraldinsight.com/imefm.htm

Related research

Keywords: Autoregressive processes; Banks; Economic trends; Islam; Malaysia;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
  2. Mosconi, Rocco & Giannini, Carlo, 1992. "Non-causality in Cointegrated Systems: Representation Estimation and Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 399-417, August.
  3. Mansor H. Ibrahim, 2005. "Sectoral Effects of Monetary Policy: Evidence from Malaysia," Asian Economic Journal, East Asian Economic Association, vol. 19(1), pages 83-102, 03.
  4. MacDonald, Ronald & Kearney, Colm, 1987. "On the specification of granger-causality tests using the cointegration methodology," Economics Letters, Elsevier, vol. 25(2), pages 149-153.
  5. Jang, Hoyoon & Sul, Wonsik, 2002. "The Asian financial crisis and the co-movement of Asian stock markets," Journal of Asian Economics, Elsevier, vol. 13(1), pages 94-104.
  6. Darrat, Ali F., 2002. "The relative efficiency of interest-free monetary system: some empirical evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(4), pages 747-764.
  7. Chrismin Tang & Mardi Dungey & Vance Martin & Brenda González-Hermosillo & Renee Fry, 2010. "Are Financial Crises Alike?," IMF Working Papers 10/14, International Monetary Fund.
    • MArdi Dungey & Renee Fry & Brenda Gonzales-Hermosillo & Vance L. Martin & Chrismin Tang, 2008. "Are Financial Crises Alike?," CAMA Working Papers 2008-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  8. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eme:imefpp:v:3:y:2010:i:4:p:291-305. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.