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The impact of Sukuk on the insolvency risk of conventional and Islamic banks.pdf (1.8 MB)

The impact of Sukuk on the insolvency risk of conventional and Islamic banks

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submitted on 2024-03-19, 06:48 and posted on 2024-03-19, 06:49 authored by Houcem Smaoui, Karim Mimouni, Akram Temimi

This paper investigates the impact of Sukuk market development on bank insolvency risk using a sample comprising 72 Islamic banks (IBs) and 145 conventional banks (CBs) spanning 15 countries over the 2003–2014 period. We measure bank insolvency risk using the z-score. Using the system-GMM estimator, we find that Sukuk market development adversely affects the insolvency risk of IBs, while that of the CBs remains unchanged. Moreover, our results point to a negative and significant effect of the size on the insolvency risk of both CBs and IBs, thus confirming the well-documented Too-Big-To-Fail hypothesis. This effect is more pronounced for IBs indicating that large IBs exhibit higher insolvency risk than their conventional counterparts. Finally, we show that the 2008 global financial crisis has exacerbated the negative effect of Sukuk market development on bank insolvency risk, as expected.

Other Information

Published in: Applied Economics
License: http://creativecommons.org/licenses/by-nc-nd/4.0/
See article on publisher's website: https://dx.doi.org/10.1080/00036846.2019.1646406

Funding

Open Access funding provided by the Qatar National Library.

History

Language

  • English

Publisher

Routledge

Publication Year

  • 2019

License statement

This Item is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Institution affiliated with

  • Qatar University
  • College of Business and Economics - QU

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