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Nexus Of Risk And Stability In Islamic Banks During The Pandemic: Evidence From Indonesia

Author

Listed:
  • Sunarsih

    (UIN Sunan Kalijaga Yogyakarta, Indonesia)

  • Rizqi Umar Al Hashfi

    (Universitas Gadjah Mada, Indonesia)

  • U’um Munawaroh

    (Universitas Gadjah Mada, Indonesia)

  • Endang Suhari

    (Universitas Sebelas Maret, Surakarta, Indonesia)

Abstract

This paper analyzes the effect of liquidity risk and credit risk on Islamic bank stability and whether the risk-stability nexus changes during the Covid-19 pandemic. Using a panel quarterly dataset of 14 Islamic banks from 2017 to 2020, a total of 224 quarterly-bank observations in total and the system generalized method of moment, we find that credit risk and liquidity risk are negatively associated with bank stability. Moreover, the COVID-19 does not alter the negative relationship between liquidity risk and stability. To validate the results, we also estimate the model using the LSDVC. The LSDVC results remain consistent. These results provide new insight into understanding risk management implementation for minimizing these risks.

Suggested Citation

  • Sunarsih & Rizqi Umar Al Hashfi & U’um Munawaroh & Endang Suhari, 2022. "Nexus Of Risk And Stability In Islamic Banks During The Pandemic: Evidence From Indonesia," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 8(4), pages 599-614, December.
    • Handle: RePEc:idn:jimfjn:v:8:y:2022:i:4f:p:599-614
    DOI: https://doi.org/10.21098/jimf.v8i4.1444
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    More about this item

    Keywords

    Credit risk; Liquidity risk; COVID-19 pandemic; Islamic banking;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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