Loan loss provision practices during economic crises: evidence from banks listed on the Damascus Securities Exchange
Layla A. Ashoor; Linda Ismaiel; Zeina Al-Ahmad
Afro-Asian J. of Finance and Accounting, Vol. 13, No. 3 (2023) pp. 277 - 304
This study aims to examine loan loss provision (LLP) practices exercised by banks listed on the Damascus Securities Exchange during the Syrian crisis, the incentives behind such practices, and whether those practices differ between Islamic and conventional banks. A sample of eleven conventional and three Islamic banks was used during the period 2011-2018. Applying a random effect panel data model revealed that banks engaged in income smoothing activities to decrease their income when their earnings were high but not to increase their income when their earnings were low. In addition, banks that reported losses in the previous year engaged in fewer income decreasing activities than banks that reported a profit; however, no evidence was detected of their engagement in income increasing activities. As per the use of LLP to manage regulatory capital or to signal future value, the findings did not support such practices. Moreover, Islamic banks do not appear to exercise different LLP practices or to have different incentives to manipulate LLP compared to conventional banks.
Tag: Islamic banks
Bank capital and liquidity creation: evidence from Islamic and conventional MENA banks
Bank capital and liquidity creation: evidence from Islamic and conventional MENA banks
Ahmad Sahyouni; Man Wang
Afro-Asian J. of Finance and Accounting, Vol. 12, No. 3 (2022) pp. 291 - 311
This paper estimates the amount of liquidity created by MENA banks over the period 2011-2016, and further investigates the impact of bank capital on liquidity creation, controlling for a set of bank-level and macro variables. The findings reveal that banks created 5.281 trillion US dollars of liquidity, which equals 28.4% of their total assets and conventional banks create more liquidity than Islamic banks, as do large banks compared to medium and small banks. But, the Islamic banks are the best in terms of liquidity creation per asset. The regression results also show a negative relationship between equity capital and liquidity creation, which support the financial fragility crowding-out hypothesis, but only for conventional banks and for large and small size banks. Finally, the study contains some implications for decision makers and regulators in the region.
Performance of conventional banks vs. Islamic banks: evidence from Indonesia
Performance of conventional banks vs. Islamic banks: evidence from Indonesia
Nevi Danila; Yousef Shahwan; Adeastri Aulia
Afro-Asian J. of Finance and Accounting, Vol. 12, No. 2 (2022) pp. 202 - 215
A sound banking system is crucial for the stability of the economy. This paper investigates the determinants of bank performance from the bank-specific and macroeconomic perspective. A fixed-effects model is used to analyse panel data on conventional and Islamic banks from 2010 to 2016. The data reveals that of the top ten private and non-government owned banks, an Islamic bank ranks as the number one performing bank. Macroeconomic variables are the only variables to have an impact on bank performance for both conventional and Islamic banks. While bank-specific variables do not influence performance, operating efficiency was shown to have an impact on Islamic banks.
Determinants of corporate governance disclosures of Islamic banks in Sudan: implications for Shariah governance
Determinants of corporate governance disclosures of Islamic banks in Sudan: implications for Shariah governance
Saed Ahmed Sulub; Zalailah Salleh; Hafiza Aishah Hashim
Afro-Asian J. of Finance and Accounting, Vol. 12, No. 2 (2022) pp. 178 - 201
The paper examines the association between the effectiveness of governance bodies in Islamic banks and corporate governance disclosure (CGD) in a sample of Sudanese banks. We analysed the content of annual reports and employed ordinary least squares (OLS) regression model with pooled effects. Consistent with previous studies in Islamic banks, the findings of this paper revealed low levels of CGD in Islamic banks of Sudan, which is only 39%, on average. The findings showed that Islamic banks with SSB members who hold advanced qualifications provided more information on CGD than their counterparts. However, we found that banks with SSB members who sit on more than one board tend to have lower CGD. In addition, we found that Islamic banks that have an established audit committee (AC), internal audit function (IAF) and low levels of governmental ownership have higher CGD levels. These results are robust to alternative empirical models. Our study adds to the ongoing debate of <i>Shariah</i> governance in Islamic banks. In particular, while we support that IAF may play a significant role in <i>Shariah</i> governance as recommended by the regulators of Islamic banking industry, our evidence shows that SSB multiple directorships, ceteris paribus, are not advantageous for Islamic banks.