Does social and governmental responsibility matter for financial stability and bank profitability? Evidence from commercial and Islamic banks

Kanapiyanova K. Faizulayev A. Ruzanov R. Ejdys J. Kulumbetova D. Elbadri M.
15 March 2023 Emerald Publishing

Journal of Islamic Accounting and Business Research
2023 #14 Issue 3 451 - 472 pp.

Purpose: This paper aims to explore the drivers of banking stability in the case of QISMUT+3 countries (Qatar, Indonesia, Saudi Arabia, Malaysia, United Arab Emirates, Turkey, Pakistan, Kuwait and Bahrain) focusing on social and governmental responsibility (SGR) determinants. Both main indicators of banking stability, namely, profitability and nonperforming loans, were treated as dependent variables. The model is examined with the whole sample and separately by examining commercial banks and Islamic banks. Design/methodology/approach: Cross-country bank-level panel data spanning from 2011 to 2018 is used. Two-step system generalized methods of moments alongside both panel-corrected standard error and feasible generalized least squares models were applied to ensure the robustness of the results. Findings: Findings reveal that capital adequacy and corruption control are the most dominant determinants of banking profitability in the studied sample regardless of the type of the bank. In addition, profitability, efficient management, inflation and government effectiveness were found to be the main drivers of financial vulnerability risk. Practical implications: Findings of this study offer many insights and policy implications to help stakeholders gain a comprehensive understanding of banking stability. Suggested policy implications targeting bank management, governmental policymakers and investors are offered to better the banking stability of QISMUT+3 countries. Originality/value: This paper has multiple contributions to the existing literature. The determinants of banking stability are examined in QISMUT+3 group of countries which is the focus of a limited number of studies. In addition, the use of a comprehensive variable set alongside the addition of SGR determinants in the case of banking system stability is one of the main contributions of this paper.

Banking stability , Conventional banks , GMM estimation , Governmental responsibility , Islamic banks , QISMUT , Social responsibility

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Al-Farabi Kazakh National University, Almaty, Kazakhstan
BCB, KIMEP University, Almaty, Kazakhstan
The Institute of Economy of Committee of Science of the Ministry of Education and Science of the Republic of Kazakhstan, Almaty, Kazakhstan
Bialystok University of Technology, Bialystok, Poland
Kazakh-Russian International University, Aktobe, Kazakhstan
University of Mediterranean Karpasia, Lefkosa, Cyprus

Al-Farabi Kazakh National University
BCB
The Institute of Economy of Committee of Science of the Ministry of Education and Science of the Republic of Kazakhstan
Bialystok University of Technology
Kazakh-Russian International University
University of Mediterranean Karpasia

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