Determinants of Islamic banks’ profitability: international evidence
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 21 August 2017
Abstract
Purpose
The purpose of this paper was to investigate the determinants of Islamic banks’ profitability using longitudinal data from 1992 to 2008 of almost all Islamic banks in the world.
Design/methodology/approach
An unbalanced panel data fixed-effects regression model was used.
Findings
The results of the study indicate that capital ratio, other operating income, GDP per capita, bank size, concentration and oil prices affected Islamic banks positively. Insurance schemes, foreign ownership and real GDP growth affected Islamic banks negatively.
Research limitations/implications
This study did not include data beyond 2008 (the financial crisis), which can be considered a limitation to this study. However, evidence suggests that including data beyond 2008 would not have changed the outcome of the study[1].
Originality/value
The paper adds to the literature on the determinants of Islamic banks’ profitability for the reasons mentioned above. In addition, this study used a purified sample of Islamic banks (see the Data section for details). Furthermore, to the author’s knowledge, this is the first time deposit insurance has been included in a study related to Islamic banks’ profitability.
Keywords
Citation
Alharbi, A.T. (2017), "Determinants of Islamic banks’ profitability: international evidence", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 10 No. 3, pp. 331-350. https://doi.org/10.1108/IMEFM-12-2015-0161
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited