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The risk of political instability and the performance of Islamic banks: does corruption matter?

Author

Listed:
  • Zuhairan Yunmi Yunan
  • Majed Alharthi
  • Saeed Sazzad Jeris

Abstract

Purpose - This study aims to investigate the relationship between political instability and the performance of Islamic banks in emerging countries. Design/methodology/approach - For a data sample of 93 Islamic banks in 20 emerging countries during the period from 2011 to 2016, the authors identify indicators that matter most for the activities of Islamic banks. Findings - The study finds that a stable government and law and order are positively correlated with the health of Islamic financial institutions. On the other hand, corruption and military involvement in politics can create an unstable environment for businesses, leading to uncertainty and risk. The study also reveals that Islamic banks operating in regions or communities with lower risk of socio-economic conditions tend to exhibit higher levels of profitability. Originality/value - Overall, the study provides valuable insights into the impact of political instability on Islamic banks in emerging countries.

Suggested Citation

  • Zuhairan Yunmi Yunan & Majed Alharthi & Saeed Sazzad Jeris, 2023. "The risk of political instability and the performance of Islamic banks: does corruption matter?," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 31(6), pages 1384-1406, November.
    • Handle: RePEc:eme:jfcpps:jfc-09-2023-0229
    DOI: 10.1108/JFC-09-2023-0229
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    More about this item

    Keywords

    Political risk; Islamic banks; Emerging countries; Profitability; Stability; Soundness; C33; D73; F40; G21;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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