How risk governance affects bank risk-taking: evidence from GCC banks on the mediating role of risk disclosure and moderating role of ownership

Purpose This paper aims to examine the effect of risk governance (RG) on bank performance and investigates whether risk disclosure and FinTech development influence the relationship between RG and bank performance. Design/methodology/approach This study examines a sample of 58 commercial banks in the Gulf Cooperation Council (GCC) countries from 2013 to 2022. Structural equation modeling and the generalized least squares technique are used as the primary empirical methodologies. To ensure robustness, the findings are validated using alternative methodologies, including the two-stage least squares technique and the two-step system Generalized Method of Moments, along with alternative measures for RG, performance, risk disclosure and FinTech development. Findings The empirical findings indicate the existence of a negative link between RG and bank performance and that this relationship is mediated by risk disclosure and moderated by FinTech development. However, a notable distinction emerges between conventional and Islamic banks, alongside significant differences based on bank size and the level of RG practices. Originality/value Considering the lack of research in this area, to the best of the author’s knowledge, this paper is the first to open a debate about how RG impacts bank performance in GCC countries. By using a large sample of conventional and Islamic banks, this study highlights the importance of risk disclosure and FinTech development that should be taken into consideration during the implementation of a RG structure.

Purpose This paper aims to explore how ownership structure impacts environmental, social and governance (ESG) performance in banks, with a particular focus on Islamic banks. It also assesses whether bank risk and board characteristics influence the relationship between ownership structure and ESG performance. Design/methodology/approach This study analyzes a sample of 48 commercial banks from the Gulf Cooperation Council (GCC) countries over the period from 2013 to 2022. The primary empirical methodologies used are structural equation modeling and the generalized least squares technique. To ensure the robustness of the findings, alternative methodologies, including the two-stage least squares technique and the two-step system generalized method of moments approach, as well as various measures for ESG, bank risk and ownership structure, are also used. Findings The empirical findings reveal a negative relationship between ownership concentration and ESG performance, while institutional and foreign ownership positively contributes to ESG performance. This relationship is mediated by the bank’s risk attitude and moderated by board characteristics. Additionally, a significant difference is observed between conventional and Islamic banks, as well as based on bank size and the level of ESG performance. Practical implications Regulators should enforce ownership diversity rules (e.g. shareholding caps, tax incentives) and mandate Sharia-aligned ESG disclosures and governance audits; bank managers must embed ESG risk assessments, internal sustainability audits, strengthened board independence and diversity, plus targeted sustainable finance training; and investors need to integrate standardized ESG ratings (MSCI, Sustainalytics) into their analyses and engage proactively with both conventional and Islamic banks to drive faith-compliant sustainability initiatives. Social implications Enhanced ESG performance across GCC banks will mobilize capital toward environmentally and socially responsible projects, support SMEs and reinforce regional economic stability. By elevating transparency and governance, especially within Islamic banking frameworks, the region’s financial institutions will attract responsible international investment, bolster their global reputation and contribute to more inclusive, resilient growth and broader social welfare. Originality/value Given the limited research on this topic, this paper initiates a discussion on the impact of ownership structure on ESG performance in GCC countries. Using a substantial sample of both conventional and Islamic banks, the study emphasizes the significance of bank risk and board characteristics, which should be considered when implementing ESG investments and practices.

Purpose — This study investigates the impact of Islamic corporate governance variables on risk-taking within a sample of 31 Islamic banks (IBs) operating in six countries in the Arab Gulf region during the period 2013–2022. Design/Methodology/Approach — The study utilises content analysis and employs two econometric models: the random-effect generalised least squares (GLS) technique and the generalised method of moments (GMM) approach. Findings — The findings reveal that two characteristics of Sharīʿah supervisory boards (SSBs), namely cross membership and knowledge in accounting and finance, have a negative impact on bank risk. However, it is observed that SSB size demonstrates a positive correlation with bank risk-taking, indicating that SSBs face challenges in effectively performing their supervisory role. Furthermore, it is noted that during the pandemic period, banks demonstrated significantly higher levels of credit risk and global risk. Originality/Value — This research provides a valuable addition to the existing literature by conducting the inaugural analysis of the relationship between SSBs and bank risk-taking in the Arab Gulf region, adding to the understanding of Islamic corporate governance dynamics. Research Implications — The study suggests reinforcing the structure of SSBs in IBs in the Gulf Cooperation Council (GCC) countries by appointing members with educational backgrounds in business, accounting, and finance. Furthermore, it supports the idea that the presence of shared scholars in IBs facilitates rational decision-making by SSBs and contributes to reduced risk-taking. Haut du formulaire

Purpose This paper aims to present a comparative evaluation of the determinants affecting the likelihood of dividend payouts by Islamic and conventional banks in the Gulf Cooperation Council (GCC) countries. Design/methodology/approach The authors used the dynamic panel logit model to test dividend life-cycle theory by analyzing the determinants affecting the likelihood of dividend payouts by GCC banks. Moreover, the authors used multinomial logistic regressions to extend the results where the dependent variable is a nominal variable equal to 1 for non-payment of dividends, 2 for lower dividend payments and 3 for higher dividend payments. Findings The authors report a finding consistent with the life-cycle theory of dividends where a higher proportion of retained-earnings-to-contribution mix implies a greater likelihood of dividend payments, apart from conventional characteristics such as profitability, size and growth. However, the authors find marked differences in the magnitude and significance of the life-cycle characteristics explaining the likelihood of dividend payouts for Islamic and conventional banks. The authors also find that Islamic banks are smaller and less profitable relative to conventional banks but have higher growth rates, which helps to explain why the proportion of dividend non-payments is higher for Islamic banks than for conventional banks. The results also indicate that the higher default rates and business risk associated with GCC banks reduces their propensity to pay dividends. Practical implications The topic of dividends remains an important puzzle in the field of modern finance. The findings have significant implications for a variety of stakeholders in both Islamic and conventional banks in GCC countries, including investors, depositors, analysts, managers, regulators and stock exchanges. Originality/value This paper aims to contribute to the literature by drawing on life-cycle theory as a basis for comparing the determinants affecting the likelihood of dividend payouts by Islamic and conventional banks in the GCC countries.

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.

Purpose This study aims to present insights for the preparation of ethical practices in the banking industry of gulf cooperation council (GCC) countries for profit maximization. This study presented information regarding ethical banking practices to determine to which extent banks in GCC countries practiced ethics. Design/methodology/approach This study followed a mixed-method approach, including both qualitative and quantitative data. For quantitative, data were collected from senior managers employed in 52 leading Islamic and conventional banks across the GCC countries, including the banks in the Kingdom of Bahrain and also from the banks in Kuwait. However, for qualitative analysis, an interview with an Islamic banking specialist was conducted. Findings The findings of both, qualitative and results from answer of respondents and quantitative results, that is, 91% of respondents strongly agreed that Islamic banks are more committed to ethical investments of projects, revealed that Islamic banks follow more ethical practices than conventional banks. Therefore, the mean score for EBP4 is 4.55 with moderate SD of 1.267. This statistical evidence is in favor that Islamic banks follow more ethical principles. Research limitations/implications Respondents were recruited randomly, and the samples consisted of only senior executives and not customers. Because of time and resource limitations, these executives were a sample of conventional and Islamic banks in the GCC only and not from other regions. Practical implications The results of this study provided valuable insights to conventional financial institutions, enabling them to enhance their operations as Islamic banks align with more ethical standards. Originality/value The research originality lies in its contribution for GCC countries by presenting a comparative view. This study defined and compared similarities and differences of Islamic and conventional banks to indicate how Islamic banks particularly implement more ethical standards than conventional banks.

Effect of COVID‐19 on the performance of Islamic and conventional GCC banks

This paper aims to ask lots of questions about the effect of various factors on the performance of the Islamic Banking Sector (IBS) in the Gulf Cooperation Council (GCC) countries. Both panel data analysis relating to random effect (RE) regression and generalized method of moments (GMM) in the system are utilized to quantify the relationship between board features and banks performance. The population of this research was 40 Islamic banks in the GCC zone with the perception went from 2005 to 2016. Our outcomes point to show that regression with GMM in system confirms the RE results just for the degree of bank capital, demonstrating a positive and significant connection between this variable and the bank performance at a 5% criticalness level. Notwithstanding, sharia board size and board duality apply a positive and huge hit on bank performance just when RE regression technique is utilized. These discoveries are applicable and valuable contribution for Islamic banks in dealing with their speculations inside their establishments. All the more significantly, Islamic banks in GCC should allow more significance to the degree of the capital bank, the structure and nature of the board, and the board duality to improve their performance.

Islamic versus conventional banks in the GCC countries: A comparative study using classification techniques

PurposeSeveral studies have studied the points that distinguish Islamic banks from conventional ones. The corresponding conclusions are a bit contradictory. This paper aims to study the similarities between Islamic and conventional banks in the Gulf countries using a new approach, namely, the clustering method based on dynamic time warping (DTW) distance.Design/methodology/approachTo study the similarities between Islamic and conventional banks, in Gulf Cooperation Council (GCC) countries, this study used the DTW distance. Then, a clustering based on this distance was carried out to find out which banks are the most similar. Finally, the authors have studied the factors that explain these similarities.FindingsThis empirical study covered 44 Islamic banks and 46 conventional banks in GCC countries during 2006–2015. The results show that Islamic and conventional banks are included in the same cluster for Qatar, Bahrain and Oman. In contrast, Islamic and conventional banks do not share the same cluster for the Kingdom of Saudi Arabia, Kuwait and the United Arab Emirates. This is because of the establishment of interest rates below discount rates. In this case, banks are incentivized to take more risks to compensate for interest losses, which increases efficiency and allocates Islamic and conventional banks to different clusters. Accordingly, there is no absolute discrimination because of the initial status between Islamic and conventional banks. However, the overall banks, either Islamic or conventional, are discriminated through the distance of the banking applied interest rate and the social discount rate.Originality/valueDTW distance-based clustering is a very suitable method for emphasizing the similarities that may exist between conventional and Islamic banks. This technique has not previously been used in the literature in question.

PurposeThis study explores, first, the performance effect (accounting- and market-based performance) of intellectual capital (IC), measured using the value-added intellectual coefficient (VAIC) and its modified version (MVAIC), on Islamic and conventional listed banks in Gulf Cooperation Council (GCC) countries and, second, whether Islamic banks outperform conventional banks in utilising IC.Design/methodology/approachUsing resource-based view theory and literature reviews, regression analyses are conducted on data for the period 2012–2019 on 26 Islamic and 42 conventional banks. For hypothesis testing, the generalised method of moments panel data regression analysis is applied after addressing endogeneity issues.FindingsResults, after controlling for corporate governance, indicate that the performance effects of IC (VAIC and MVAIC) on both bank types largely converge and Islamic banks do not outperform conventional banks in IC use. IC has a stronger effect on accounting performance measures for conventional banks than for Islamic banks, but IC has some effect on market performance measures for Islamic banks alone. Corporate governance variables do not play a significant role in the presence of VAIC and MVAIC although there are differences in corporate governance between the two bank types.Originality/valueThis study bridges the gap in GCC banking sector literature on the association between IC efficiency and performance measures of Islamic and conventional banks, from a comparative perspective. It enhances understanding, about the IC–financial performance nexus, of policymakers, regulators, bank managers and other stakeholders interested in the influence of different business models, financing/investment methods and governance structure on the performance of both bank types.

PurposeThis study aims to explore the extent of risk disclosure (RD) among conventional banks (CBs) and Islamic banks (IBs) listed on stock markets in the Gulf cooperation council (GCC). It also examines the influence of RD on the banks’ financial performance as measured by return on assets (ROA) and return on equity (ROE).Design/methodology/approachThis study uses content analysis to examine RD in the annual reports of 16 CBs and 14 IBs in the GCC for a sample of 240 firm-year observations over the period 2007 to 2014.FindingsThe study shows no significant differences between the RD reported in the annual reports of CBs and that of IBs. On average, a CB reported 234 sentences while an IB disclosed 244 sentences of RD in its annual report. The authors also find that both types of banks had an upward trend over the periods. While the means of RD reported by CBs have significantly improved over the period, the RD reported by IBs has not. Similar results are also found when the authors compared the RD pre- and post-financial crisis period. Finally, the authors find that there is a significant association between RD and both models of financial performance (ROA and ROE) for IBs, after controlling other variables. However, RD has a significant association with only ROE for CBs.Research limitations/implicationsThe bank selection was restricted to publicly traded banks in the GCC. Other financial institutions and different types of industries were not considered. Further research could determine whether the results obtained in this study could be generalized to different industries in the GCC and or in other countries.Practical implicationsThis study provides evidence on the significant association between RD and the financial performance of CBs and IBs in GCC countries. This study could be helpful to regulatory authorities in encouraging banks to adopt the best practice of RD and thus promote banks’ transparency.Originality/valueThis is the first known study to examine the RD practices of both types of banks and their association with banks’ financial performance in five-GCC countries (Kuwait, Qatar, Saudi Arabia, United Arab Emirates and Bahrain), based on a longitudinal analysis of year-end annual reports, covering eight years period from 2007 to 2014.

Purpose – This study aims to explore the extent of risk disclosure (RD) among conventional banks (CBs) and Islamic banks (IBs) listed on stock markets in the Gulf cooperation council (GCC). It also examines the influence of RD on the banks’ financial performance as measured by return on assets (ROA) and return on equity (ROE). Design/methodology/approach – This study uses content analysis to examine RD in the annual reports of 16 CBs and 14 IBs in the GCC for a sample of 240 firm-year observations over the period 2007 to 2014. Findings – The study shows no significant differences between the RD reported in the annual reports of CBs and that of IBs. On average, a CB reported 234 sentences while an IB disclosed 244 sentences of RD in its annual report. The authors also find that both types of banks had an upward trend over the periods. While the means of RD reported by CBs have significantly improved over the period, the RD reported by IBs has not. Similar results are also found when the authors compared the RD pre- and post-financial crisis period. Finally, the authors find that there is a significant association between RD and both models of financial performance (ROA and ROE) for IBs, after controlling other variables. However, RD has a significant association with only ROE for CBs. Research limitations/implications – The bank selection was restricted to publicly traded banks in the GCC. Other financial institutions and different types of industries were not considered. Further research could determine whether the results obtained in this study could be generalized to different industries in the GCC and or in other countries. Practical implications – This study provides evidence on the significant association between RD and the financial performance of CBs and IBs in GCC countries. This study could be helpful to regulatory authorities in encouraging banks to adopt the best practice of RD and thus promote banks’ transparency. Originality/value – This is the first known study to examine the RD practices of both types of banks and their association with banks’ financial performance in five-GCC countries (Kuwait, Qatar, Saudi Arabia, United Arab Emirates and Bahrain), based on a longitudinal analysis of year-end annual reports, covering eight years period from 2007 to 2014.

PurposeThe aim of this paper has twofold: (1) to explain and compare the financial evolution of Islamic and conventional banking sector in the Gulf Cooperative Council (GCC) countries before and during the COVID-19 pandemic and (2) to explore the key success factors that might affect Islamic and conventional banks performance before and mainly during COVID-19 pandemic period.Design/methodology/approachOrbis Bank Focus database and annual financial reports are used to collect financial information of Islamic and conventional banks in GCC countries over four years: 2017, 2018, 2019 and 2020. Descriptive statistics, T-test, multiple regression, and 2SLS and GMM models are employed to analyze the financial structure and performance of Islamic and conventional banks before and during the COVID-19 pandemic period.FindingsResults of this study reveal that (1) there is a significant difference between Islamic banks and conventional banks during the crisis of COVID-19, where the conventional banks have presented a higher level of financial performance and financial liquidity than their Islamic counterparts, (2) conventional banks have revealed higher capacity to manage their financial risk during the crisis period, and (3) a high level of non-performing loan, high inflation rate and high percentage of non-important cost have a negative impact on the financial performance of Islamic banks mainly during the pandemic period of COVID-19. However, the result indicates that a high level of liquidity risk increased the performance of Islamic banks but this impact falls sharply during the pandemic period.Originality/valueThis study provides information that supports investors, regulators and executive managers in GCC countries. A well-structured balance sheet would improve the financial performance and risk management of the banking sector in GCC countries, especially in times of crisis and pandemics.

This study analyses how capital influences profitability and risk in the context of Islamic and conventional banking in Gulf Cooperation Council (GCC) countries. It achieves this through structure-conduct-performance, moral hazard, and regulatory hypotheses. We apply the generalised method of moments (GMM) technique for dynamic panels using bank-level data from 85 banks for the 2003-2011 period. We first found that highly capitalised Islamic banks generate low profitability, while in contrast, highly capitalised conventional banks generate high profitability. Secondly, we found highly capitalised GCC banks (both Islamic and conventional) to be characterised by greater risk. Additionally, all profitability and risk variables demonstrate persistence. We then ultimately arrive at the same conclusions about capital, profitability, and risk relationship with the introduction of regulatory variables.