Liquidity risk, credit risk and stability in Islamic and conventional banks

By M. K. Hassan, Ashraf Khan, A. Paltrinieri. Research In International Business and Finance, 2019

233 citations recorded by the source corpus.

The aim of this paper is to provide a thorough assessment of Islamic banks’ (IBs) liquidity risk compared to conventional banks (CBs). We firstly investigate the relationship between liquidity and credit risk. Employing a simultaneous structural equation approach, on a comprehensive dataset of 52 IBs and CBs, from selected Organization of Islamic Cooperation Countries for the period of 2007–2015, we find that credit risk and liquidity risk have negative relationship. We then investigate the relationship between liquidity risk and stability, finding a negative relationship just for IBs. We finally show that Islamic banks are better than conventional in managing risks.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/64ac2fb85e208984e075e9f95d51b864699735a4

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In Accounting

1. Faridah Najuna Misman
2. Naseem Al Rahahleh
3. M. Bhatti

In Economics and Econometrics

1. Faridah Najuna Misman
2. Naseem Al Rahahleh
3. M. Bhatti

In Finance

1. Faridah Najuna Misman
2. Naseem Al Rahahleh
3. M. Bhatti

Citations in the corpus

• Developments in Risk Management in Islamic Finance: A Review (2019, background): “Most recently, Hassan et al. (2019) published a study on the relationship between liquidity and credit risk by using a simultaneous structural equation approach to 52 IBs and CBs for the period of 2007–2015.”