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The subprime crisis and Islamic stock markets integration

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Author Info

  • Bakri Abdul Karim
  • Nor Akila Mohd. Kassim
  • Mohammad Affendy Arip

Abstract

Purpose – The 2008-2009 crisis had no significant impact on the Turkish banking system (TBS), with the TBS achieving a record level of profitability in 2009. The strong position of Turkish banks against the global crisis is attributed generally to the good regulation and risk management in the TBS. The measures implemented by The Turkish Central Bank, and The Banking Regulation and Supervision Agency, e.g. high capital adequacy ratio, played a significant role. But, this judgment does not take into consideration the high profitability and some inefficiency of TBS in his role of financial intermediation. The purpose of this paper is to analyze the TBS's performance in the face of the global crisis. Design/methodology/approach – The paper compare the measures against the global crisis and the performances of banking systems by public supports to financial sector, measures taken vis-à-vis the crisis, ratios as deposits/loans, loans to non-financial sector and return to assets. Findings – The paper explains that the performance of TBS against the crisis is, to some extent, due to the high profitability and low efficiency in financial intermediation. Practical implications – Financial regulation and policy particularly in emerging or underdeveloped economies should find equilibrium between the soundness and efficiency of banking system. Originality/value – In full financial crisis the majority of scientific work focuses on the prudential regulation of the banking system and the problem of moral hazard. In fact, countries such as Turkey are still far from having the same problems and concerns. The paper shows that in spite of the global crisis, the TBS continued to obtain very raised profits: it can be said that the banking system soundness improved with the detriment the non-financial sector.

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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: 363-371

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Handle: RePEc:eme:imefpp:v:3:y:2010:i:4:p:363-371

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Related research

Keywords: Diversification; Islam; Portfolio investment; Stock markets;

References

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  1. Hwahsin Cheng & John L. Glascock, 2006. "Stock Market Linkages Before and After the Asian Financial Crisis: Evidence from Three Greater China Economic Area Stock Markets and the US," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 297-315.
  2. Morris Goldstein & Michael Mussa, 1993. "The Integration of World Capital Markets," IMF Working Papers 93/95, International Monetary Fund.
  3. M. Shabri Abd. Majid & Ahamed Kameel Mydin Meera & Mohd. Azmi Omar, 2008. "Interdependence of ASEAN-5 Stock Markets from the US and Japan," Global Economic Review, Taylor and Francis Journals, vol. 37(2), pages 201-225.
  4. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
  5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  6. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  7. W. N. W. Azman-Saini & M. Azali & M. S. Habibullah & K. G. Matthews, 2002. "Financial integration and the ASEAN-5 equity markets," Applied Economics, Taylor and Francis Journals, vol. 34(18), pages 2283-2288.
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