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Socioeconomic Development and Its Effect on Performance of Islamic Banks: Dynamic Panel Approaches

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Macroprudential Regulation and Policy for the Islamic Financial Industry

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Abstract

Islamic banks are highly incorporated with social issues because of their rules and regulations. Profit not only depends on its own return and investment but also on trust, moral issues which may be more related to banking profitability. To test these gaps, this chapter attempts to investigate the socioeconomic factors along with bank-specific factors of global Islamic banks using dynamic GMM and Quantile regression. The dataset used in this study involves 55 full-fledged Islamic Banks from 24 countries across the globe. The results suggest that Return on Assets (ROA) is significantly positive to bank-specific factors such as credit risk has and statistically negative to cost-to-income ratio. It is also suggested that the relationship between risk and return is heterogeneous or dissimilar across different quantiles. Findings of the study tend to unravel that the socioeconomic factors especially political stability and investment freedom have positive and significant relation to the Islamic bank performance.

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Author information

Authors and Affiliations

  1. INCEIF and Shahjalal University of Science and Technology, Sylhet, Bangladesh

    Mohammad Ashraful Ferdous Chowdhury

  2. INCEIF, Lorong Universiti A, Kuala Lumpur, 59100, Malaysia

    Md. Mahmudul Haque, Syed Othman Alhabshi & Abul Mansur Mohammed Masih

Authors
  1. Mohammad Ashraful Ferdous Chowdhury
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  2. Md. Mahmudul Haque
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  3. Syed Othman Alhabshi
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  4. Abul Mansur Mohammed Masih
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Corresponding author

Correspondence to Mohammad Ashraful Ferdous Chowdhury .

Editor information

Editors and Affiliations

  1. Islamic Development Bank, Islamic Research and Training Institute, Jeddah, Saudi Arabia

    Muhamed Zulkhibri

  2. Islamic Development Bank, Islamic Research and Training Institute, Jeddah, Saudi Arabia

    Abdul Ghafar Ismail

  3. University College of Bahrain, Business Administration Department, Manama, Bahrain

    Sutan Emir Hidayat

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Chowdhury, M.A.F., Haque, M.M., Alhabshi, S.O., Masih, A.M.M. (2016). Socioeconomic Development and Its Effect on Performance of Islamic Banks: Dynamic Panel Approaches. In: Zulkhibri, M., Ismail, A., Hidayat, S. (eds) Macroprudential Regulation and Policy for the Islamic Financial Industry. Springer, Cham. https://doi.org/10.1007/978-3-319-30445-8_14

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