INCEIF Knowledge Repository (INCEIF University)
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The determinants of the profitability of Islamic banks: a cross-sectional study from Asia and Africa
No full textStudies on Islamic banks' profitability are important towards improving performance, evaluating bank operations and determining management plan to survive in competitive markets. The present study seeks to fill a gap by providing new empirical evidence on the factors that influence the profitability of the Islamic banks. The ordinary least square method is employed using annual data of 2013 on 44 Islamic banks from Asian and African region. The findings reveal that bank-specific factors such as the operating efficiency ratio are negatively and statistically significant to the profitability of the Islamic banks, while equity financing is positive and statistically significant to the profitability. The credit risks and liquidity risks factors are insignificant on the performance of the Islamic banks. On the other hand, macroeconomic factors such as inflation have a positive and significant impact on the profitability whereas GDP growth rate has no significant impact on the profitability of Islamic banks
Comment on “Different impacts of scientific and technological knowledge on economic growth: vontrasting science and technology policy in East Asia and Latin America”
No full textThe Kim and Lee (2015) paper on the innovation experiences of East Asia and Latin America represents a refreshing attempt at relating the economic impact of science and technology (S&T) in the two regions to the S&T policies pursued, using econometric techniques. The authors show that East Asia has been more successful than Latin America in the application of S&T knowledge to grow economically. They conclude that the differences in the contributions of S&T to economic growth in the two regions are largely due to the adoption of what appears to be diametrically opposite policy approaches toward S&T. While the S&T policy impact could help explain the differences in the pace of economic growth in East Asia and Latin America, there is no suggestion that it is all entirely due to S&T policies per se. There is also a need to explain why there is such a contrasting S&T policy in the first place. In the literature, there are references to “East Asian values” as a driver of growth in East Asia, which may not correspond to “Latin American values” or the Spanish/Portuguese cultural influences that prevail in Latin America, although there is no hard evidence to support these assertions
Developing trading strategies based on fractal finance: an application of MF-DFA in the context of Islamic equities
No full textWe provide a new contribution to trading strategies by using multi-fractal de-trended fluctuation analysis (MF-DFA), imported from econophysics, to complement various momentum strategies. The method provides a single measure that can capture both persistency and anti-persistency in stock prices, accounting for multifractality. This study uses a sample of Islamic stocks listed in the U.S. Dow Jones Islamic market for a sample period covering 16 years starting in 1996. The findings show that the MF-DFA strategy produces monthly excess returns of 6.12%, outperforming other various momentum strategies. Even though the risk of the MF-DFA strategy may be relatively higher, it can still produce a Sharpe ratio of 0.164, which is substantially higher than that of the other strategies. When we control for the MF-DFA factor with the other factors, its pure factor return is still able to yield a monthly excess return of 1.35%. Finally, we combine the momentum and MF-DFA strategies, with the proportions of 90/10, 80/20, and 70/30 and by doing so we demonstrate that the MF-DFA measure can boost the total monthly excess returns as well as Sharpe ratio. The value added is non-linear which implies that the additional returns are associated with lower incremental ris
Low market penetration of takaful among Malaysians: non-takaful customer's perspective
No full textThe Malaysian Takaful industry has experienced encouraging growth sinceits commencement in 1985. Annual growth rate of the industry has beenestimated at 20%. Despitethis rapid rate of growth the rate of penetration isstill not impressive. This paper seeks to find the reasons for this relativelylow penetration rate of the Takaful industry among Malaysians from the perspective of Malaysians who do not participate in the Takaful industry.The method employed to achieve the objective of this paper was the surveymethod; Data analysed using Logistic Regression Model (LR).This research finds that marketing, is a robust predictor of Takaful demand, as 50% of the respondents have not been approached by any Takaful agents, while religion has a significant relationship with Takaful consumption as majorityof the respondents do not plan to have Takaful is not permissible being similar to conventional insurance (Haram). Also age was a significant factor among the young respondents not planning to participate in Takaful policies
Economic crime: blown out of proportion or a real treat?
No full textThere is ambiguity in defining economic crime or sometimes referred to as white collar crime or finance crime. The general notion refers to economic crimes as illegal acts in which offenders' principal motivation appears to be economic gain. However, is it possible to conclude on the offenders' motivation merely by observing the criminal act? Another school of thought claims that economic crimes are illegal acts that successfully provide offenders with an economic return or for which victims incur an economic cost
Impact of account receivable management on the profitability of Shari'ah and non-Shari'ah compliant firms in the Malaysian market
No full textWorking capital is important for any firm and its administration is acknowledged as an essential of corporate administration. The main objective of working capital management is to choose the appropriate levels of the working capital components in order to ensure that the firm is able to meet its operating expenses and mitigate risks of default on payment of short-term obligations. In addition, working capital management is important for a firm’s survival because of its effects on a firm’s profitability and risk, and consequently its value (Gimeno, Folta et al. 1997) (Gunay and Kesimli 2011) and (Deloof 2003). Failure to manage working capital in prudent manner may lead to liquidity crisis and reduction in profitability, affecting the ability of firm to continue its operations
Antifragility of Islamic finance
No full textThis research attempts to show that risk sharing, as defined under Islamic finance, makes financial systems antifragile. The recent financial crisis has given rise to discussions around a new term known as antifragility, used for evaluating the long-term stability of a financial system. Antifragility specifies conditions under which systems become resilient to shocks caused by Black Swans. These are highly unpredictable outlier events that have a major negative (or positive) consequence when they occur, with their occurence only being explained retrospectively. According to this concept, the long-term survivability of any system centers exclusively on its antifragile nature, that is, its ability to absorb and actually benefit from Black Swan-type shocks. This research aims to investigate risk sharing Islamic finance, qualitatively (via literature-based research) and quantitatively (via mathematical modeling), as an antifragile system ..
Property rights and the stock market-growth nexus
No full textUsing threshold estimation techniques, this study examines whether the growth effect of stock market development differs according to the different levels of property rights and minority shareholders protection in a cross-section of 85 jurisdictions during the post-crisis period. The results demonstrate that the impact of stock market liquidity on growth is positive and significant only in jurisdictions where there is high level of property rights protection. Similar effect is discerned in the case of strong minority shareholders protection. Using the market size as a measure of stock market development, the paper also documents a positive growth effect of market size when property rights and minority shareholders protection are strong. However, there is mixed evidence in the low to medium degrees of protection. Further analyses using other broader governance indicators as threshold variables and instrumental variable threshold regressions reaffirm the main findings. The study upholds the “better finance, more growth” proposition and contributes to the identification of thresholds above which institutional quality can positively shape the impact of stock market on economic growth
Is the Shariah governance framework effective?
No full textIslamic financial institutions (IFIs) have enjoyed rapid growth globally and the total global assets of the industry as of end-2014 exceeded USD2.0 trillion or a compounded annual growth rate (CAGR) of 17.4% between 2009 and 2014. Like other sectors, IFIs are expected to practice good governance to inspire public and stakeholder confidence and trust. To this end, the government introduced the Islamic Financial Services Act 2013 to provide greater regulatory clarity and focus on good governance and social responsibility. Likewise, leading markets like Hong Kong, the Philippines, Singapore and the UK have initiated regulatory reforms with the aim to build well-governed Islamic banking and capital markets
Hotel investment and financing: a call for Shariah consideration and new methodology of assessment and screening
No full textIt investigates the nature of the hotel business from the Islamic law perspective and its importance in the Malaysian economy. It argues that exclusion of hotel business from Islamic investment and financing activities through Shari'ah screening methodology may be inappropriate. Hence, it recommends that the Shari'ah Advisory Council (SAC) of Securities Commission Malaysia reconsider the assessment and screening process for hotel business in the light of arguments put forward in the research in favour of its Shari'ah compliance