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Dependence between Islamic banks and conventional banks and risk factors

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  • Mohamed Amin Chakroun
  • Mohamed Imen Gallali

Abstract

This study aims to identify the risk factors amplifying the contagion risk between the Islamic to conventional banks. Using the copula approach and the panel VAR model, findings justify the presence of a dependent relationship between the two types of banks, where the sense of causality of this phenomenon is unidirectional derived from conventional to Islamic banks. Hence, our results indicate that the market risk, the credit risk and the size of the financial institution represent the major factors triggering the contagion risk between both types of banks. To this extent, Islamic banks should consider more restricted standards to be able to ensure their independence and to handle their contagion risk.

Suggested Citation

  • Mohamed Amin Chakroun & Mohamed Imen Gallali, 2021. "Dependence between Islamic banks and conventional banks and risk factors," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 12(3), pages 201-239.
    • Handle: RePEc:ids:injbaf:v:12:y:2021:i:3:p:201-239
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    Cited by:

    1. Priya Malhotra & Pankaj Sinha, 2024. "Balanced Funds in India Amid COVID-19 Crisis: Spreader of Financial Contagion?," IIM Kozhikode Society & Management Review, , vol. 13(1), pages 7-24, January.

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