The impact of Islamic banks’ resilience and culture on market share: Evidence from Muslim countries in MENA and ASEAN

Abstract

This study examines whether the resilience of Islamic banks, measured using competitiveness, diversification, capitalization, and credit risk, affects market share. In particular, culture captured using Hofstede’s dimension is also included. This study covers a broader spectrum of Muslim countries in MENA and ASEAN. It used a sample of 82 Islamic banks with six years of data from 16 countries. The nexus between variables was tested using a fixed effect model. This study also employed robustness and sensitivity analysis. The empirical results show that the resilience of Islamic banks under market competitiveness plays a positive role in market share. Market competitiveness tends to lead to an increase in the level of market share; otherwise, diversification, capitalization, and credit risk are not found to influence. This study also finds that culture significantly positively affects market share. It demonstrates that the more individualistic the culture in a nation, the more likely the market share will increase. Based on the result, this study provides additional insight that the resilience dimension through Islamic banks’ competitiveness has the significant role in supporting the increase of market share. At the same time, culture is a considerable dimension in driving the improvement of market share.