Title: The impact of prudential regulation on risk-taking within dual banking systems: interest-free vs. interest-based banking industries

Authors: Ameni Ghenimi; Algia Hammami; Mohamed Ali Brahim Omri

Addresses: GEF2A Lab, Department of Finance, University of Tunis El Manar, Tunisia ' Research Unit: Governance, Finance and Accounting, Department of Finance, Faculty of Economic Sciences and Management of Sfax, University of Sfax, Tunisia ' Accounting Department, College of Business Administration, Northem Border University, Saudi Arabia; GEF2A Lab, University of Tunis El Manar, Tunisia

Abstract: This paper investigates the impact of regulatory capital on banks' risk-taking. We use a panel of 19 Islamic and 49 conventional banks operating in the MENA region over the period 2006-2013 employing the dynamic panel data model. Our results show that regulatory capital has a positive impact on the financial stability of Islamic and conventional banks. In other words, regulatory capital reduces the banks risk-taking. Our results provide new insights about the relationship between regulatory capital and risk-taking, which makes them useful for a wide range of audiences, including regulators, bankers, policymakers, as well as practitioners and researchers.

Keywords: risk-taking; regulatory capital; financial stability; Islamic bank.

DOI: 10.1504/IJAF.2018.097152

International Journal of Accounting and Finance, 2018 Vol.8 No.3, pp.245 - 264

Accepted: 29 Jun 2018
Published online: 26 Dec 2018 *

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