The Impact of the Global Financial Crisis on the Financial Institutions : A Comparison between Islamic Banks ( Ibs ) and Conventional Banks ( Cbs )

Abstract

The aim of this study is to determine the impact of the current global financial crisis on IBs compared to the CBs relying on accounting ratios. Firstly, we introduce 26 financial ratios in the stepwise Logit model to determine whether it is possible to distinguish between the two types of banks in the international context based on financial characteristics. Over 110 bank-year observations, we found that accounting ratios are good discriminators between IBs and CBs in the international context. Secondly, to determine the impact of the global financial crisis on IBs compared to the CBs, we introduce a new variable CRISIS which is a time condition that distinguishes between the crisis period and the pre-crisis period. Our main empirical results obtained from Logit analysis show clearly that IBs are more stable and immunized against the 2007-2008 crisis due to the requirements of the Shariaa.