The Performance of Islamic vs. Conventional Banks: Evidence on the Suitability of the Basel Capital Ratios
Forthcoming Open Economic Review
35 Pages Posted: 14 Mar 2018
Date Written: March 11, 2018
This paper examines the effect of various types of bank capital on the profitability and efficiency of conventional and Islamic banks. Our results show that higher quality forms of capital improve the profitability and efficiency for both systems although the results are stronger for conventional banks. The capital effect is more pronounced for large, too-big-to-fail, and highly capitalized banks. The results are robust across various subsamples, alternative profitability and efficiency measures, and different estimation techniques.
Keywords: Bank Capital, Basel Capital, Profitability, Efficiency
JEL Classification: G21, G28, P43, P47
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