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Systematic and Unsystematic Risk Determinants of Liquidity Risk Between Islamic and Conventional Banks

Author

Listed:
  • Waeibrorheem Waemustafa

    (School of Economic Finance and Banking, Universiti Utara Malaysia, UUM, Kedah 06010, Malaysia)

  • Suriani Sukri

    (School of Business Innovation and Technoprenuership, UniMap, Jln Kangar Alor Setar, 01000, Kangar Perlis, Malaysia.)

Abstract

The fundamental function of banking remains unchanged throughout the the history of banking theory. The management of risk, asset and liability remain the core function of banking. The early signal of banking crisis can be observed from the volatility of liquidity risk. Hence, this study attempted to investigate the influence of external and internal factors affecting liquidity risk of Islamic and conventional banks. This study employs time series regression analysis of Islamic banks and conventional banks from 2000 to 2010. The study found that Islamic banks maintain higher liquidity compared to conventional banks. The multivariate regression analysis shows that 4 out of 14 bank-specific factors and one macroeconomic factor significantly influence the liquidity risk of Islamic bank whereas conventional banks show that 5 out of 13 bank-specific factors are significant to liquidity risk

Suggested Citation

  • Waeibrorheem Waemustafa & Suriani Sukri, 2016. "Systematic and Unsystematic Risk Determinants of Liquidity Risk Between Islamic and Conventional Banks," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 6(4), pages 1321-1327.
    • Handle: RePEc:eco:journ1:2016-04-04
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    References listed on IDEAS

    as
    1. Bourke, Philip, 1989. "Concentration and other determinants of bank profitability in Europe, North America and Australia," Journal of Banking & Finance, Elsevier, vol. 13(1), pages 65-79, March.
    2. Mr. Luca Errico & Ms. Mitra Farahbaksh, 1998. "Islamic Banking: Issues in Prudential Regulations and Supervision," IMF Working Papers 1998/030, International Monetary Fund.
    3. Étienne Bordeleau & Christopher Graham, 2010. "The Impact of Liquidity on Bank Profitability," Staff Working Papers 10-38, Bank of Canada.
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    Keywords

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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G01 - Financial Economics - - General - - - Financial Crises

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