Asset Securitization and Bank Risk: Do Religiosity or Ownership Structure Matter?

37 Pages Posted: 18 Mar 2017 Last revised: 12 Apr 2019

See all articles by Omneya Abdelsalam

Omneya Abdelsalam

Durham University

Marwa Elnahass

Newcastle University Business School

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Date Written: March 14, 2017

Abstract

We test the impact of religiosity and ownership structure on the risk profile of banks, which issued securitisation. We employ GMM estimation using unique database on asset securitization of 672 commercial banks (4889 year-observations) in 22 countries (from 2003-2012), which have dual banking system. We find that banks with higher securitisation activity have consistently shown a riskier profile by being significantly less adequately capitalised and offering higher ratio of net loans to total assets. Controlling for bank type (Islamic and conventional banks), we find that although Islamic banks, in general, show a conservative approach towards risk by keeping higher reserves and more liquidity, banks involved in new issuance of asset securitization as still exposed to a higher risk profile. Controlling for a country religiosity shows different risk profile of banks in countries with different religiosity thresholds. Controlling for different types of bank ownership highlights an additional exposure to credit risk in addition to capital adequacy and liquidity risks. Our results emphasize the importance of identifying the impact of bank type and the religiosity/culture factors in global banking studies. Our results are of importance to both local and international regulators as well as different stakeholders in banks.

Keywords: Securitisation, Islamic banks, Conventional banks, Bank Risk, Capitalization

JEL Classification: C23, G01, G21, G28, L50, M41

Suggested Citation

Abdelsalam, Omneya and Elnahass, Marwa and Mollah, Sabur, Asset Securitization and Bank Risk: Do Religiosity or Ownership Structure Matter? (March 14, 2017). Available at SSRN: https://ssrn.com/abstract=2933118 or http://dx.doi.org/10.2139/ssrn.2933118

Omneya Abdelsalam

Durham University ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Marwa Elnahass

Newcastle University Business School ( email )

5 Barrack Road
Newcastle University Business School
Newcastle Upon Tyne, NE1 4SE
United Kingdom

Sabur Mollah (Contact Author)

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

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