SHAREHOLDERS’ AND INVESTMENT ACCOUNT HOLDERS’ (DEPOSITORS’) RETURNS IN ISLAMIC BANKS

Abstract

The research aims to analyze the returns of shareholders and investment accounts holders (depositors) for Islamic banks to determine the optimal alternative; whether to invest in deposits or to purchase shares of Islamic banks. Because of the high degree of similarity between risks associated with investment account holders (depositors) and risks associated with investment in shares for Islamic banks as both of them have no specific guaranteed return defined in advance, the article measures the rate of returns after adjustments the shareholders returns for market risk measured by standard deviation, which reflects the level of volatility for shareholders return rate. In calculating the returns for shareholders, the change in market value on the bank’s level for the two successive periods will be considered for the capital gain or loss. The inductive approach will be followed in presenting types of risks, whereas the descriptive and analytical approach to be followed in measuring shareholders’ returns and comparing them with deposits return. The study covered the period from 2010 to 2019, and the data were extracted from the published annual reports for these banks. Despite that depositors and shareholders are exposed to similar risks, and this similarity is due to the Modaraba contract, the average rate of returns for shareholders is higher than the average rate of returns for depositors/investment accounts holders in Islamic banks for the sample study. The main recommendation of the study is to invest in Islamic bank shares instead of deposits after considering the trade-off between risks and returns. Keywords: Shareholders’ Returns, Unrestricted Investment Account Holders’ Returns, Dividends, Risks, Islamic Banks DOI： https://doi.org/10.35741/issn.0258-2724.58.1.61