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Do Profit-sharing Investment Account Holders Provide Market Discipline in an Islamic Banking System?

Author

Listed:
  • Omar Alaeddin
  • Simon Archer
  • Rifaat Ahmed Abdel Karim
  • Mohd. Eskandar Shah Mohd. Rasid

Abstract

Market discipline is one of the main pillars of stability and resiliency in the banking system. The mechanism of market discipline primarily relies on the role of depositors who receive timely information and act accordingly through their respective accounts. In this study, we use generalized method of moments panel technique for 44 Islamic banks across different regions to research the presence of market discipline in the global Islamic banking system, focusing on the behaviour of the PSIA holders and their role in the governance of Islamic banks. These results have a significant policy implication in reviewing the framework governing the Islamic banks.

Suggested Citation

  • Omar Alaeddin & Simon Archer & Rifaat Ahmed Abdel Karim & Mohd. Eskandar Shah Mohd. Rasid, 2017. "Do Profit-sharing Investment Account Holders Provide Market Discipline in an Islamic Banking System?," Journal of Financial Regulation, Oxford University Press, vol. 3(2), pages 210-232.
    • Handle: RePEc:oup:refreg:v:3:y:2017:i:2:p:210-232.
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    File URL: http://hdl.handle.net/10.1093/jfr/fjx006
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    Cited by:

    1. Rihab Grassa & Nejia Moumen & M. Kabir Hassan & Khaled Hussainey, 2022. "Market discipline and capital buffers in Islamic and conventional banks in the MENA region," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 139-167, March.
    2. Roukia Bouhider, 2021. "Econometric study of the effect of deposits on Islamic Banks profitability: Evidence from Malaysia," Economics Bulletin, AccessEcon, vol. 41(3), pages 1292-1302.

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