Comparative Analysis on Liquidity and Risk-Taking Behaviour between Islamic and Conventional Banks in MENA Region

We compare the effect of liquidity on risk-taking between Islamic and conventional banks in the MENA region over the period 2005-2017. Using the fixed effect panel model with panel-corrected standard error, we found that funding liquidity in both Models significantly affects conventional banks'...

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Bibliographic Details
Published in:Journal of Islamic Economic and Business Research (Online) 2022-12, Vol.2 (2), p.172-188
Main Authors: Mairafi Salihu, Liman, Hassan, Sallahuddin, Mohamed-Arshad, Shamsul Bahrain
Format: Article
Language:English
Subjects:
bank risk-taking
islamic banking
mena region
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Summary:We compare the effect of liquidity on risk-taking between Islamic and conventional banks in the MENA region over the period 2005-2017. Using the fixed effect panel model with panel-corrected standard error, we found that funding liquidity in both Models significantly affects conventional banks' risk-taking behaviour, but the effect on the Islamic counterpart is insignificant. However, liquidity risk and bank activities represented by loans significantly affect Islamic bank risk-taking behaviour but show no significant effect on conventional banks. However, the effect varies with risk-taking proxies and the size of banks. This entails liquidity and bank risk-taking behaviour that differs with the type of banking system and the countries’ peculiarities. Thus, liquidity regulation should be implemented with the consideration of other region and their peculiarities.
ISSN:2798-1207
2798-1304
DOI:10.18196/jiebr.v2i2.68