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The Impact of 1998 and 2008 Financial Crises on Profitability of Islamic Banks

Author

Listed:
  • Ahmad, Nor Hayati Bt

    (Professor of Banking and Risk Management, College of Business, Universiti Utara Malaysia.)

  • Noor, Mohamad Akbar

    (Supply Chain Management Department, PETRONAS Carigali Sdn Bhd, Malaysia and College of Business, Universiti Utara Malaysia.)

  • Noor, Bin Mohamad

    (Supply Chain Management Department, PETRONAS Carigali Sdn Bhd, Malaysia and College of Business, Universiti Utara Malaysia.)

Abstract

The paper investigates the profitability of 78 Islamic banks in 25 countries for the period of 1992-2009. The Fixed Effect Model (FEM) used to analyse profitability shows that profit efficiency is positive and statistically significant with operating expenses against asset, equity, high income countries and non-performing loans against total loans. Interestingly, the empirical results show that more profitable banks are those that have higher operating expenses against asset, more equity against asset and concentrated at high income countries demonstrating close relationship between monetary factors in determining Islamic banks profitability. The findings for 1998 Asian Financial Crisis and 2008 Global Financial Crisis are negative and imply that Islamic banks’ profitability has not been impacted during Asian and Global Financial crises.

Suggested Citation

  • Ahmad, Nor Hayati Bt & Noor, Mohamad Akbar & Noor, Bin Mohamad, 2011. "The Impact of 1998 and 2008 Financial Crises on Profitability of Islamic Banks," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 34(1), pages 1-22, March.
    • Handle: RePEc:ris:badest:0508
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    References listed on IDEAS

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    Cited by:

    1. Korkut, Cem & Özgür, Önder, 2017. "Is there a Link between Profit Share Rate of Participation Banks and Interest Rate?[:] The Case of Turkey," MPRA Paper 81642, University Library of Munich, Germany.
    2. Muhamad Muda & Amir Shaharuddin & Abdelhakim Embaya, 2013. "Comparative Analysis of Profitability Determinants of Domestic and Foreign Islamic Banks in Malaysia," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 559-569.

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    More about this item

    Keywords

    Financial Crises; Islamic Banking;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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