Title: Islamic banks and conventional banks within the recent global financial crisis: empirical evidence from the GCC region
Authors: Mohamed Chakib Kolsi; Fatma Zehri
Addresses: Department of Accounting, Emirates College of Technology, P.O. Box 41009, Abu Dhabi, United Arab Emirates ' Department of Accounting, College of Economics and Administrative Sciences, Al Imam Mohammad Ibn Saud Islamic University, P.O. Box 5701, Riyadh, Saudi Arabia
Abstract: The current global financial crisis has revealed many failures of the conventional banking system. However, this context of turbulences has presented the Islamic banking system with a great opportunity to introduce its fundamental methods and principles inspired from the Islamic Shariah law. The aim of this study is to check the impact of the current global financial crisis on Islamic banks compared to conventional ones based on accounting ratios. First, we introduce 26 financial ratios in the stepwise Logit model to determine whether it is possible to distinguish between the two kinds of banks in the international context based on bank's financial characteristics. Using a sample of Islamic banks, we show that accounting ratios are good discriminators between Islamic banks (IBs) and conventional banks (CBs) in the international context. In fact, during the crisis, Islamic banks are more profitable, less efficient and less risky than conventional ones. Second, results obtained from Logit regression show that Islamic banks are more stable and immunised against the crisis 2007-2008 due to the requirements of the Shariah law.
Keywords: financial crisis; Islamic banks; conventional banks; risk; bank efficiency; profitability; asset quality; banking industry; Islamic finance; Islam; GCC countries; Gulf Cooperation Council; Shariah law; accounting ratios; financial ratios.
International Journal of Financial Services Management, 2014 Vol.7 No.3/4, pp.196 - 218
Received: 11 Dec 2013
Accepted: 17 May 2014
Published online: 29 Oct 2014 *