The Performance of Islamic Vs. Conventional Banks: Evidence on the Suitability of the Basel Capital Ratios

  • Mohammad Bitar
  • M. Kabir Hassan
  • Kuntara Pukthuanthong
  • Thomas Walker
Research Article
  • 17 Downloads

Abstract

This paper examines the effect of various types of bank capital on the profitability and efficiency of conventional and Islamic banks. Our results show that higher quality forms of capital improve the profitability and efficiency for both systems although the results are stronger for conventional banks. The capital effect is more pronounced for large, too-big-to-fail, and highly capitalized banks. The results are robust across various subsamples, alternative profitability and efficiency measures, and different estimation techniques.

Keywords

Bank capital Basel capital Profitability Efficiency 

JEL Classification

G21 G28 P43 P47 

Notes

Acknowledgements

We thank participants at the 2016 KFUPM Islamic Banking and Finance Research Conference (Riyadh, Saudi Arabia), the editor, and two anonymous reviewers for constructive comments on an earlier version of our paper. All remaining errors are, of course, our own.

Supplementary material

11079_2018_9492_MOESM1_ESM.docx (59 kb)
ESM 1 (DOCX 59 kb)

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of FinanceConcordia UniversityMontréalCanada
  2. 2.Department of FinanceUniversity of New Orleans, College of Business AdministrationNew OrleansUSA
  3. 3.Department of FinanceUniversity of MissouriColumbiaUSA

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