Abstract
The main aim of this study is to empirically examine and compares the impacts of oil price shocks, Arab revolutions, some macroeconomics, and bank-specific variables on bank profitability indicators between Conventional and Islamic banks in Gulf Cooperation Council (GCC) countries. The study employed panel Autoregressive-Distributed Lag (ARDL) techniques to examine the causal relationship both at the short and long-run. Our results reveal that most of the variables employed in our study significantly influence Return on Asset (ROA), Return on Equity (ROE), and Net Interest Margin (NIM)/ Net Profit Margin (NPM) for both Conventional Banks (CBs) and Islamic Banks (IBs) similarly in the long run. Findings from our study imply that both CBs and IBs have some similar features in nature, which could be because of the structure of the policies for IBs is in line with the regulatory framework for the CBs. The main finding from the study is the significance of oil price shock and the Arab springs that are more pronounced in CBs than IBs. Also, it can be seen that a sustainable profit of IBs is higher than CBs due to the adjustment speed of IBs to equilibrium in the presence of shock is found to be higher than CBs. Hence, our study suggests that oil price shock could be utilized for having a prudent macro regulation for the banks in GCC countries. Our findings are useful to Government officers, bankers, investors, and researchers for their decision making by estimating future trends of the profitability for both Conventional and Islamic banks in the GCC countries.
Highlights
Banking has a strong influence on both industrial prosperity and stability [1]
In order to fill the gap in the literature, the motivation behind this paper is to explore the impacts on the sustainability of bank profitability between conventional and Islamic banks of the oil price shocks, the Arab revolutions, some macroeconomics and the bank variables
The results show that most of the bank-specific variables and macroeconomic variables employed in this study are still found to be significant for both the Conventional Banks (CBs) and Islamic Banks (IBs), which implies that there is no much difference in terms of the influence of the oil price fall on the two banks, even though they are different in structures and operations
Summary
Banking has a strong influence on both industrial prosperity and stability [1]. Banking is an important economic provider. In order to fill the gap in the literature, the motivation behind this paper is to explore the impacts on the sustainability of bank profitability between conventional and Islamic banks of the oil price shocks, the Arab revolutions, some macroeconomics and the bank variables. As far as we know our research is one paper that aims, across the macroeconomic variables of GCC countries, only lead to a growing of both Islamic and traditional banking services in the market, oil prices and the Arab Spring. This study contains the following contribution to the literature: Secondly, the Analysis would have an effect on the sustained income of Islamic and traditional banks on banks’ specific factors and the overall macroeconomic and financial turmoil, the Revolutions of the Arab Spring, and the oil price crisis.
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