What drives the banking competition in Islamic finance oriented countries? Islamic vs conventional banks

Faizulayev A. Wada I. Kyzdarbekova A.S. Parmankulova I.
2021 Emerald Group Holdings Ltd.

Journal of Islamic Accounting and Business Research
2021 #12 Issue 4 457 - 472 pp.

Purpose: This study aims to examine the dynamics of banking competition between Islamic banks (IBs) and conventional banks (CBs) in emerging finance-oriented Islamic economies, also known as the QISMUT + 3 (i.e. Qatar, Indonesia, Saudi Arabia, Malaysia, the United Arab Emirates, Turkey, Bahrein, Kuwait and Pakistan). The main aim was to conduct a comparative market power analysis between IBs and CBs in the 2006–2015 period. Design/methodology/approach: The study used bank-specific and macro-economic variables available in the Orbis Bank Focus and the World Bank databases. The study applied a dynamic approach to detect endogeneity problems and unobserved heterogeneity using the two-step system GMM estimate. Findings: The research shows that market power persists in both types of banks over time. It also demonstrates that capital adequacy does not explain the market power of banking in the studied countries. Unlike IBs, the scale of banking does not influence the market power CBs. Corruption undermines competition in the conventional banking system. However, because of the ideological orientation of IBs, corruption does not affect their competitiveness. IBs outperform CBs in QISMUT + 3 countries in terms of banking competitiveness. They also have higher persistency of market power in the region. Practical implications: This study is a very beneficial source of information that can provide effective guidelines for efficient productivity and improved competitiveness of IBs and CBs in finance-oriented Islamic countries. Originality/value: The study is the first to compare the market power of IBs and CBs in this country classification. In addition, the study examined a large number of IBs and CBs to carry out this research.

Banking competition determinants , Conventional banking , Emerging markets , Islamic banking , QISMUT+3 , Top nine Islamic finance-oriented countries

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BCB Faculty, Kimep University, Almaty, Kazakhstan
Department of Accounting and Finance, Institute of Social Sciences, University of Mediterranean Karpasia, Lefkosa, Cyprus and Department of Economics, Faculty of Economics, Administrative and Social Sciences, Turkey B. Nisantasi University, Istanbul, Turkey
Higher School of Business and Economics, Al-Farabi Kazakh National University, Almaty, Kazakhstan
Department of Finance, Almaty Management University, Almaty, Kazakhstan

BCB Faculty
Department of Accounting and Finance
Higher School of Business and Economics
Department of Finance

10 лет помогаем публиковать статьи Международный издатель

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