Title: The relationship between Islamic banks' profitability and country income levels

Authors: Mohamad Akbar Noor Mohamad Noor; Nor Hayati bt. Ahmad

Addresses: College of Business, Universiti Utara Malaysia; PETRONAS Carigali Sdn Bhd, Level 52, Tower 1, Petronas Twin Towers, Kuala Lumpur City Center, 50088 Kuala Lumpur, Malaysia. ' College of Business, Universiti Utara Malaysia, Professor Office, COLGIS Building, 06010 Sintok, Kedah, Malaysia

Abstract: This paper investigates the efficiency of 78 Islamic banks in 25 countries for the period 1992-2009. The Fixed Effect Model (FEM) that was used to analyse profitability proposed that profit efficiency is positive and statistically significant with operating expenses against asset, high income countries and non-performing loans against loans. Interestingly, the empirical results show that the more profitable banks are those that have higher operating expenses against assets, more equity against assets and concentration in high income countries. The finding is high income countries that engage more with banking products that can lead towards profitability of Islamic banks.

Keywords: Islamic banks; bank profitability; panel regression analysis; country income levels; Islamic finance; profit efficiency; banking products.

DOI: 10.1504/IJBCG.2012.046286

International Journal of Business Competition and Growth, 2012 Vol.2 No.2, pp.129 - 151

Published online: 15 Nov 2014 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article