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Analysis of Short-Term Asset Concentration in Islamic Banking

  • Mirakhor, Abbas

In general the process of implementation of Islamic banking in the Islamic Republic of Iran and Pakistan appears to be proceeding with relative success. However, number of problems have surfaced during the transition period, among which is a tendency for short-term assets to dominate commercial bank portfolios. The negative effects on capital formation is one result of this portfolio behavior. The cause of this behavior is a set of regulations constraining profit-sharing activities of commercial banks. It is shown here that such regulations rather than reducing the risks of bankruptcies in the banking system may well increase them.

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File URL: http://mpra.ub.uni-muenchen.de/56029/1/MPRA_paper_56029.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 56029.

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Date of creation: 1987
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Publication status: Published in IMF Working Paper 87.67(1987): pp. 1-28
Handle: RePEc:pra:mprapa:56029
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  1. Santomero, Anthony M, 1984. "Modeling the Banking Firm: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 576-602, November.
  2. George J. Stigler, 1967. "Imperfections in the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 75, pages 287.
  3. Koehn, Michael & Santomero, Anthony M, 1980. " Regulation of Bank Capital and Portfolio Risk," Journal of Finance, American Finance Association, vol. 35(5), pages 1235-44, December.
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  7. John L. Evans & Stephen H. Archer, 1968. "Diversification And The Reduction Of Dispersion: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 23(5), pages 761-767, December.
  8. Shapiro, Alan C., 1982. "Risk in International Banking," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(05), pages 727-739, December.
  9. Michaelsen, Jacob B. & Goshay, Robert C., 1967. "Portfolio Selection in Financial Intermediaries: A New Approach," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 2(02), pages 166-199, June.
  10. Kahane, Yehuda, 1977. "Capital adequacy and the regulation of financial intermediaries," Journal of Banking & Finance, Elsevier, vol. 1(2), pages 207-218, October.
  11. John Lintner, 1965. "Security Prices, Risk, And Maximal Gains From Diversification," Journal of Finance, American Finance Association, vol. 20(4), pages 587-615, December.
  12. Bashir, B. A., 1983. "Portfolio management of islamic banks : `Certainty model'," Journal of Banking & Finance, Elsevier, vol. 7(3), pages 339-354, September.
  13. Samuelson, Paul A., 1967. "General Proof that Diversification Pays," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 2(01), pages 1-13, March.
  14. Abbas Mirakhor & Mohsin S. Khan, 1991. "Islamic Banking," IMF Working Papers 91/88, International Monetary Fund.
  15. Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," The Journal of Business, University of Chicago Press, vol. 45(3), pages 444-55, July.
  16. Babcock, Guilford C, 1972. "A Note on Justifying Beta as a Measure of Risk," Journal of Finance, American Finance Association, vol. 27(3), pages 699-702, June.
  17. Blair, Roger D & Heggestad, Arnold A, 1978. "Bank Portfolio Regulation and the Probability of Bank Failure: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(1), pages 88-93, February.
  18. Santomero, Anthony M & Watson, Ronald D, 1977. "Determining an Optimal Capital Standard for the Banking Industry," Journal of Finance, American Finance Association, vol. 32(4), pages 1267-82, September.
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