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Liquidity risk determinants: Islamic vs conventional banks.

Authors :
Ghenimi, Ameni
Chaibi, Hasna
Omri, Mohamed Ali Brahim
Source :
International Journal of Law & Management; 2021, Vol. 63 Issue 1, p65-95, 31p
Publication Year :
2021

Abstract

Purpose: This paper aims to identify and analyze the similarities and differences of the liquidity risk determinants within conventional and Islamic banks. Design/methodology/approach: This study uses a dynamic panel data approach to examine the relationship between liquidity risk and a set of bank-specific and macroeconomic factors during 2005–2015, by selecting 27 Islamic banks and 49 conventional ones operating in the MENA region. More specifically, the dynamic two-step generalized method of moment estimator technique introduced by Arellano and Bond (1991) is applied. Findings: The results suggest that the set of bank-specific variables influences the liquidity risk of both banking systems, while macroeconomic factors determine the liquidity risk of conventional banks. Islamic banks are not affected by macroeconomic determinants. Practical implications: The research facilitates to the academicians, practitioners and bankers to have an alluded picture about liquidity risk determinants and their management. The findings can be used by bankers' policy decision-makers to improve and enhance their consideration for liquidity risk management in both banking systems. Indeed, the study makes them aware to manage liquidity risk differently between conventional and Islamic banks, as the results reveal different liquidity risk determinants. Originality/value: Compared to the abundant studies on the determinants of credit risk, researchers have not sufficiently addressed the factors influencing liquidity risk. Moreover, none of these few research studies has discussed and compared liquidity risk determinants within both banking systems operating in the Middle East and North Africa (MENA) region. This leads us to identify the similarities and differences between conventional and Islamic banks in the MENA region in respect of systematic and unsystematic determinants of the liquidity risk. The value is attributed to the increasing differentiation between Islamic and conventional banks. Islamic banks are characterized with a different liquidity structure distinguishing them from their conventional counterparts. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
1754243X
Volume :
63
Issue :
1
Database :
Complementary Index
Journal :
International Journal of Law & Management
Publication Type :
Academic Journal
Accession number :
147840401
Full Text :
https://doi.org/10.1108/IJLMA-03-2018-0060