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Bank Specific and Macroeconomics Dynamic Determinants of Credit Risk in Islamic Banks and Conventional Banks

Author

Listed:
  • Waeibrorheem Waemustafa

    (School of Economic, Finance & Banking (SEFB), Universiti Utara Malaysia, Sintok 06010, Kedah, Malaysia,)

  • Suriani Sukri

    (School of Business Innovation and Technopreneurship (PPIPT), Universiti Malaysia Perlis, Kangar, 01000 Kangar, Perlis, Malaysia.)

Abstract

The study analyzes macroeconomic and bank specific determinants of credit risk in Islamic and Conventional Banks. Multivariate Regression analysis is applied on the sample of 15 conventional banks and 13 Islamic Banks in Malaysia over the period between 2000 and 2010. The finding shows that the banks specific determinants of credit risk are uniquely influenced the credit risk formation of Islamic and Conventional banks. The study found that risky sector financing; regulatory capital (REGCAP) and Islamic Contract are significant to credit risk of Islamic banks. For Conventional Banks, loan loss provision, debt-to-total asset ratio, REGCAP, size, earning management and Liquidity are significant factors influencing credit risk. As for macroeconomic factors only Inflation and M3 are significant to credit risk for both Islamic and Conventional banks.

Suggested Citation

  • Waeibrorheem Waemustafa & Suriani Sukri, 2015. "Bank Specific and Macroeconomics Dynamic Determinants of Credit Risk in Islamic Banks and Conventional Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 476-481.
    • Handle: RePEc:eco:journ1:2015-02-19
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    References listed on IDEAS

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    More about this item

    Keywords

    Determinants of Credit Risks; Murabahah and Bai-Bhithaman Ajil; Islamic contracts; Islamic and Conventional Banks;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services
    • P4 - Political Economy and Comparative Economic Systems - - Other Economic Systems

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