Risk-adjusted profitability and stability of Islamic and conventional banks: Does revenue diversification matter?

Andrea Paltrinieri, Simone Rossi, Alberto Dreassi, Ashraf Khan

Risultato della ricerca: Contributo in rivistaArticolo in rivista

10 Citazioni (Scopus)

Abstract

Revenue diversification in banking offers opportunities and threats. Recent academic research shows that disadvantages may outweigh advantages, in terms of both volatility of profitability and bank riskiness. Literature on this topic in emerging countries and in the field of Islamic finance is limited: our aim is to empirically test if revenue diversity affects Islamic banks differently than conventional institutions. We analyze the impact of income diversification on profitability and firm-risk of banks in selected OIC countries, in the period 2007–2016, using a comprehensive dataset of 47 Islamic and 154 conventional banks, through diverse measures and econometric approaches. We find that diversification provides lower rewards for Islamic banks than conventional banks, with effects that are stronger for accounting-based measures rather than market-based metrics. Shares of non-interest income positively contribute to profitability regardless of the business model, whereas income diversification shows a not significant effect on the risk-adjusted profitability of Islamic banks. Moreover, we do not find any relationship between income diversification and stability for both conventional and Islamic banks.
Lingua originaleEnglish
pagine (da-a)N/A-N/A
RivistaGlobal Finance Journal
DOI
Stato di pubblicazionePubblicato - 2020

Keywords

  • Distance-to-default
  • Income diversification
  • Islamic banks
  • Z-score

Fingerprint

Entra nei temi di ricerca di 'Risk-adjusted profitability and stability of Islamic and conventional banks: Does revenue diversification matter?'. Insieme formano una fingerprint unica.

Cita questo