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

See all articles by Mohammad Bitar

Mohammad Bitar

Nottingham University Business School; University of Nottingham

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Kuntara Pukthuanthong

University of Missouri, Columbia

Thomas John Walker

Concordia University, Quebec - Department of Finance

Date Written: March 11, 2018

Abstract

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

Suggested Citation

Bitar, Mohammad and Hassan, M. Kabir and Pukthuanthong, Kuntara and Walker, Thomas John, The Performance of Islamic vs. Conventional Banks: Evidence on the Suitability of the Basel Capital Ratios (March 11, 2018). Forthcoming Open Economic Review, Available at SSRN: https://ssrn.com/abstract=3138225

Mohammad Bitar

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

University of Nottingham ( email )

Nottingham, Québec
Canada

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

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