The Performance of Islamic Banks During the 2008 Global Financial Crisis: Evidence from Gulf Cooperation Council Countries
21 Pages Posted: 2 Nov 2014
Date Written: October 31, 2014
The purpose of this study is to analyse the performance of Islamic banks in terms of profitability of GCC region during 2008 global financial crisis. Bank specific data are taken from the Bank Scope database and macroeconomic data are collected from International Financial Statistics. Using a panel data series of 30 banks for the period of 2005 to 2011, the study shows the availability of structural break for the crisis year as well as the factors that impact the profitability of Islamic banks. The performance of GCC Islamic banks was significantly influenced during the crisis period by capital adequacy, credit risk, financial risk, operational efficiency, liquidity, bank size, gross domestic product, growth rate of money supply, bank sector development and inflation rate. The study also found that there was structural change before and after the global financial crisis. The study concludes that the Sharia compliant banks performed better during the crisis and were not affected based on their internal performance records; rather, they were affected indirectly from the macro shock due to the economic crisis.
Keywords: Islamic Banking, Sharia Compliant, GCC Region, Global Financial Crisis, ROA
JEL Classification: G21, G24
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