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The governance, risk-taking, and performance of Islamic banks

Mollah, Sabur, Hassan, M. Kabir, Al Farooque, Omar and Mobarek, Asma 2017. The governance, risk-taking, and performance of Islamic banks. Journal of Financial Services Research 51 , pp. 195-219. 10.1007/s10693-016-0245-2

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Abstract

We examine whether the difference in governance structures influences the risk taking and performance of Islamic banks compared to conventional banks. Using a sample of 52 Islamic banks and 104 conventional banks in 14 countries for the period from 2005 to 2013, we conclude that the governance structure in Islamic banks plays a crucial role in risk taking as well as financial performance that is distinct from conventional banks. Particularly, we show that the governance structure in Islamic banks allows them to take higher risks and achieve better performance because of product complexities and transaction mechanisms. However, Islamic banks maintain a higher capitalization compared to conventional banks. These results support the research on Islamic investment and risk taking. Our results add a new dimension to the governance research that could be a valuable source of knowledge for policy makers and regulators in the financial services sector.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HJ Public Finance
Publisher: Springer Verlag (Germany)
ISSN: 0920-8550
Date of First Compliant Deposit: 1 December 2016
Date of Acceptance: 15 March 2016
Last Modified: 10 Jul 2020 08:47
URI: http://orca.cf.ac.uk/id/eprint/96546

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