Determinants Of Islamic Banks' Margins In Asian Countries
DOI:
https://doi.org/10.31436/jif.v6i0.255Abstract
This paper examines the determinants of margins in Islamic banks for the period 2005â€2013. Specifically, we apply pooled, static and dynamic panel regressions on 76 Islamic banks in Asian countries. The results suggest the main factors that influence the margins of Islamic banks are numerous including bank size, default risk, overhead cost, capitalization, market concentration, GDP growth and inflation. It is evident that enhancing macroeconomic policies, risk management capabilities and operational efficiency could help in lowering the margins.
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References
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Arellano, M., Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68, 29–51.
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Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115–143.
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Chortareas, G. E., Garza-garcÃa, J. G., & Girardone, C. (2012). Competition , efficiency and interest rate margins in Latin American banking. International Review of Financial Analysis, 24, 93–103.
Claeys, S., & Vander Vennet, R. (2008). Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West. Economic Systems, 32(2), 197–216.
FungáÄová, Z., & Poghosyan, T. (2011). Determinants of bank interest margins in Russia: Does bank ownership matter? Economic Systems, 35, 481–495.
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Islam, M. S., & Nishiyama, S. I. (2016). The determinants of bank net interest margins: A panel evidence from South Asian countries. Research in International Business and Finance, 37, 501–514.
Krasicka, O., & Nowak, S. (2012). What’s in it for me? A primer on differences between Islamic and conventional finance in Malaysia. IMF Working Paper, WP/12/151.
Lee, S. P., & Isa, M. (2017). Determinants of bank margins in a dual banking system. Managerial Finance, 43(6), MF-07-2016-0189.
Lewis, M. K. (2014). A theoritical perspective on Islamic banking and financial intermediation. In M. K. Lewis, M. Ariff, & S. Mohamad (Eds.), Risk and Regulation of Islamic Banking. Cheltenham, UK: Edward Elgar.
Naceur, S., & Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks’ performance. Emerging Markets Review, 12, 1–20.
Poghosyan, T. (2013). Financial intermediation costs in low income countries: the role of regulatory, institutional, and macroeconomic factors. Economic Systems, 37, 92–110.
Saunders, A., & Schumacher, L. (2000). The determinants of bank interest rate margins: An international study. Journal of International Money and Finance, 19, 813–832.
Soedarmono, W., & Tarazi, A. (2013). Bank opacity, intermediation cost and globalization: evidence from a sample of publicly traded banks in Asia. Journal of Asian Economics, 29, 91–100.
Sun, P. H., Hassan, M. K., Hassan, T., & Ramadilli, S. M. (2014). The assets and liabilities gap management of conventional and Islamic banks in the organization of Islamic cooperation (OIC) countries. Applied Financial Economics, 24(5), 333–346.
Tiby, A. M. El. (2011). Islamic Banking. New Jersey: John Wiley & Sons.
Trinugroho, I., Agusman, A., & Tarazi, A. (2014). Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis? Research in International Business and Finance, 32, 139–158.
Arellano, M., Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68, 29–51.
Barajas, A., Steiner, R., & Salazar, N. (1999). Interest spreads in banking in Colombia, 1974-96. IMF Staff Papers, 46, 196–224.
Bashir, A. M. (2003). Determinants of profitability in Islamic banks: some evidence from the Middle East. Islamic Economic Studies, 11(1), 31–57.
Beck, T., Levine, R., & Loayza, N. (2000). Finance and the sources of growth. Journal of Financial Economics, 58, 261–300.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115–143.
Carbó Valverde, S., & RodrÃguez Fernández, F. (2007). The determinants of bank margins in European banking. Journal of Banking and Finance, 31, 2043–2063.
Chortareas, G. E., Garza-garcÃa, J. G., & Girardone, C. (2012). Competition , efficiency and interest rate margins in Latin American banking. International Review of Financial Analysis, 24, 93–103.
Claeys, S., & Vander Vennet, R. (2008). Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West. Economic Systems, 32(2), 197–216.
FungáÄová, Z., & Poghosyan, T. (2011). Determinants of bank interest margins in Russia: Does bank ownership matter? Economic Systems, 35, 481–495.
Ho, T., Saunders, A. (1981). The determinants of bank interest margins: theory and empirical evidence. Journal of Financial and Quantitative Analyses, 16, 581–600.
Hutapea, E. G., & Kasri, R. A. (2010). Bank margin determination: a comparison between Islamic and conventional banks in Indonesia. International Journal of Islamic and Middle Eastern Finance and Management, 3(1), 65–82.
IFSB. (2017). Islamic Financial Services Industry Stability Report 2016. IFSB, Kuala Lumpur.
Islam, M. S., & Nishiyama, S. I. (2016). The determinants of bank net interest margins: A panel evidence from South Asian countries. Research in International Business and Finance, 37, 501–514.
Krasicka, O., & Nowak, S. (2012). What’s in it for me? A primer on differences between Islamic and conventional finance in Malaysia. IMF Working Paper, WP/12/151.
Lee, S. P., & Isa, M. (2017). Determinants of bank margins in a dual banking system. Managerial Finance, 43(6), MF-07-2016-0189.
Lewis, M. K. (2014). A theoritical perspective on Islamic banking and financial intermediation. In M. K. Lewis, M. Ariff, & S. Mohamad (Eds.), Risk and Regulation of Islamic Banking. Cheltenham, UK: Edward Elgar.
Naceur, S., & Omran, M. (2011). The effects of bank regulations, competition, and financial reforms on banks’ performance. Emerging Markets Review, 12, 1–20.
Poghosyan, T. (2013). Financial intermediation costs in low income countries: the role of regulatory, institutional, and macroeconomic factors. Economic Systems, 37, 92–110.
Saunders, A., & Schumacher, L. (2000). The determinants of bank interest rate margins: An international study. Journal of International Money and Finance, 19, 813–832.
Soedarmono, W., & Tarazi, A. (2013). Bank opacity, intermediation cost and globalization: evidence from a sample of publicly traded banks in Asia. Journal of Asian Economics, 29, 91–100.
Sun, P. H., Hassan, M. K., Hassan, T., & Ramadilli, S. M. (2014). The assets and liabilities gap management of conventional and Islamic banks in the organization of Islamic cooperation (OIC) countries. Applied Financial Economics, 24(5), 333–346.
Tiby, A. M. El. (2011). Islamic Banking. New Jersey: John Wiley & Sons.
Trinugroho, I., Agusman, A., & Tarazi, A. (2014). Why have bank interest margins been so high in Indonesia since the 1997/1998 financial crisis? Research in International Business and Finance, 32, 139–158.
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Published
2017-12-31
How to Cite
Malim, N. A. K., Masron, T. A., & Pitchay, A. A. (2017). Determinants Of Islamic Banks’ Margins In Asian Countries. Journal of Islamic Finance, 6, 046–053. https://doi.org/10.31436/jif.v6i0.255
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