Are Islamic Banks Really More Solvent Than Conventional Banks in a Financial Stable Period?

Abstract

The knowledge value produced by this research was established in particular by the methodological challenges of the comparative study. Based on a process of bibliographic research, available conditional observation and necessary statistical tests, we innovated an equiprobable comparison between the solvencies of conventional and Islamic banks over the period (2010-2018). Our study is not only a matter of dealing generically with the financial solvency question of conventional and Islamic banks, but also, we analysed the inherent implications and difficulties that may alter the results and influence the establishment of an operative evaluation of financial institutions. Two samples were taken from two reference populations. The core populations are all existing conventional and Islamic banks in the selected countries. The choice of banks is limited to countries whose banking systems incorporate both Islamic and conventional banks regardless of the proportion of each system in the country's banking market. Subsequently, each list bank was reduced on the basis of qualitative and quantitative filtering criteria. Therefore, each conventional bank has its closest Islamic equivalence in terms of capital and size taken from the same country. This restriction reduced the sample size to 63 banks each. The selected banks are all large and listed in different stock exchanges around the world. In conclusion, we found that conventional banks are more solvent than Islamic banks during a financial stable period.