Is the GCC Islamic Banks' Financial Performance Affected by the 2007 / 2008 Financial Crisis ?

Abstract

The purpose of this study is to examine the influence of the 2007/2008 financial crisis into financial performance of Islamic banks in the GCC and determine factors that significantly influence financial performance of the Islamic banks during 2005-2010. Data of 23 Islamic banks that completely reported their financial statements during 2005-2010 was extracted from Bankscope database. The relationship between dependent and independent variables was tested using panel data regression analysis. The study found that the financial crisis significantly affected financial performance of Islamic banks in the GCC. The impacts of the crisis were even worse in the two years after the crisis. The study also found equity, short term funding, overhead expenses and GDP per capita as the factors which significantly influenced financial performance of Islamic banks in the GCC during 2005-2010. The study is expected to benefit stakeholders of Islamic banks in the GCC in order to understand the factors that influence Islamic banking financial performance and minimize the impacts of any future financial crises.