The Determinants of Islamic Banks’ Stock Prices Volatility: Evidence From the GCC Countries

Ahmad Sauqi,Muhammad Muhajir Aminy

doi:10.24235/amwal.v12i2.7050

Ahmad Sauqi, Muhammad Muhajir Aminy

Open Access

https://doi.org/10.24235/amwal.v12i2.7050

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Abstract

Islamic banks’ stock is a new interesting material to be discussed among Islamic economics scholars. The majority of Islamic banks’ stocks presents in middle-east countries, especially those which are joining as the Gulf Cooperation Council (GCC) countries. Samples in this study were 10 islamic banks in the Gulf Cooperation Council (GCC) Countries with secondary data from their financial report. A panel data regression analysis was employed to seek the influence of all observed variables (ROA, ROE, and ICSR (zakat)) as the determinant factors toward Islamic banks’ stock prices volatility. The study found that all the independent variables simultaneously have an impact on Islamic banks’ stock prices in that area. The study also found that the variable of ROA has a negative significant impact and the variable of ROE has a positive significant impact, while total of zakat spending by corporates as the ICSR variable has an insignificant impact on Islamic banks’ stock prices because zakat is an obligation to pay within the GCC countries. This study suggested all Islamic banks globally to consider investors’ sentiment toward Islamic banks’ financial condition before entering the Islamic capital market.

Highlights

Islamic banking has been widely spread over the world with its Islamic financial products
The purpose of this study is to analyse the impact of profitability ratios, namely Return on Asset (ROA) and Return on Equity (ROE), and Islamic Corporate Social Responsibility (ICSR) disclosure on the volatility of stock prices in the Islamic capital market
This study employed a panel data regression analysis to seek the influence of all observed variables (ROA, ROE, and ICSR) toward Islamic banks’ stock prices

Summary

Introduction

Islamic banking has been widely spread over the world with its Islamic financial products. The differences between Islamic banks’ products have been analysed by most Muslim academicians and scholars, those who work with researches focusing on Islamic economics topics, Islamic banks as Islamic financial institutions. Islamic banks’ assets have reached more than 16% per annum globally throughout the world between 2010 and 2014. In 2010, it had achieved USD 490 billion, and still increasing to the amount of USD 882 billion for the year of 2014. The most significant contributing countries for this increase comes from an area namely the Gulf Cooperation Council (GCC) countries in the middle-east region, followed by Islamic banks in ASEAN countries (including Indonesia and Malaysia) as the second contributing countries, Turkey, and South Asia

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