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Financial Risk And Islamic Banks’ Performance In The Gulf Cooperation Council Countries

Author

Listed:
  • Hussein A. Hassan Al-Tamimi
  • Hela Miniaoui
  • Walaa Wahid Elkelish

Abstract

This study examines the relationship between financial risk and performance of Gulf Cooperation Council Islamic banks and the relative importance of the most common types of risk. The study covers 11 of the 47 Islamic banks of the Gulf Cooperation Council region from 2000 to 2012, based on the availability of data. Data were obtained from the Bankscope database. For bank performance, the two most common measures, ROA and ROE, were alternatively used and for risk measures. Four types of financial risk were used, namely credit risk, liquidity risk, operational risk, and capital risk. Regression analysis indicate there exists a significant negative relationship between the Gulf Cooperation Council Islamic banks’ performance, capital risk and operational risk. The results also confirm a significant negative relationship between Gulf Cooperation Council Islamic banks’ performance. Furthermore, the results indicate that the most important type of risk is capital risk, followed by operational risk

Suggested Citation

  • Hussein A. Hassan Al-Tamimi & Hela Miniaoui & Walaa Wahid Elkelish, 2015. "Financial Risk And Islamic Banks’ Performance In The Gulf Cooperation Council Countries," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(5), pages 103-112.
    • Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:5:p:103-112
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    References listed on IDEAS

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    1. Aisyah Rahman, 2010. "Financing structure and insolvency risk exposure of Islamic banks," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 24(4), pages 419-440, December.
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    4. Aisyah Abdul Rahman, 2010. "Three-Factor CAPM Risk Exposures: Some Evidence from Malaysian Commercial Banks," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 6(1), pages 47-67.
    5. Evelyn Hayden & Daniel Porath & Natalja Westernhagen, 2007. "Does Diversification Improve the Performance of German Banks? Evidence from Individual Bank Loan Portfolios," Journal of Financial Services Research, Springer;Western Finance Association, vol. 32(3), pages 123-140, December.
    6. Micco, Alejandro & Panizza, Ugo & Yanez, Monica, 2007. "Bank ownership and performance. Does politics matter?," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 219-241, January.
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    Citations

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    Cited by:

    1. Ghanim Shamas & Zairani Zainol & Zairy Zainol, 2018. "The Impact of Bank’s Determinants on Liquidity Risk: Evidence from Islamic Banks in Bahrain," Journal of Business & Management (COES&RJ-JBM), , vol. 6(1), pages 1-22, January.
    2. Olalere Oluwaseyi Ebenezer & Md. Aminul Islam & Wan Sallha Yusoff & Farid Ahammad Sobhani, 2019. "Exploring Liquidity Risk and Interest-Rate Risk: Implications for Profitability and Firm Value in Nigerian Banks," Journal of Reviews on Global Economics, Lifescience Global, vol. 8, pages 315-326.
    3. Charles Ayodele JEGEDE & Yusuf Aina SOYEBO & Segun Kamoru FAKUNMOJU & Olajide Idowu OKUNBANJO, 2021. "Financial Risk Management and Financial Performance of International Authorisation Quoted Deposit Money Banks (DMBs) in Nigeria," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 178-185.
    4. Safa Jallali & Faten Zoghlami, 2022. "Does risk governance mediate the impact of governance and risk management on banks’ performance? Evidence from a selected sample of Islamic banks," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 30(4), pages 439-464, February.
    5. Muhammad Imran & Fiaz Ahmad Sulehri, 2023. "Impact Of Financial Risk On Profitability: A Comparative Study Of Manufacturing And Services Sectors Of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(1), pages 18-13.
    6. Khan, Umair & Khalid, Umair & Farooq, Fatima, 2021. "Endogeneity Quagmire Empirical Evidence from Telecommunication Industry of Pakistan," Journal of Accounting and Finance in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 7(4), pages 955-967, December.
    7. narjess BOUABDALLAH & jamel Eddine HENCHIRI, 2020. "impact of operational risk on credit risk and liquidity risk," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 11(1), pages 151-175, June.
    8. Ghanim Shamas & Zairani Zainol & Zairy Zainol, 2017. "The Moderating Role of Staff Efficiency in the Relationship between Bank¡¯s Specific Variables and Liquidity Risk in Islamic Banks of Gulf Cooperation Council (GCC) Countries," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(12), pages 278-290, December.

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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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