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The Nexus between Economic Freedom and Islamic Bank Performance: Empirical Evidence from the MENA Banking Sectors

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  • Fadzlan Sufian

Abstract

The present study provides new empirical evidence on the impact of economic freedom on Islamic banks’ performance. The empirical analysis focuses on Islamic banks operating in the MENA banking sectors during the period 2000–2008. We find that the larger, more diversified, and better capitalized Islamic banks tend to be relatively more profitable, while credit risk and expense preference behavior seem to exert negative impact. The findings suggest that greater financial freedom positively influence the profitability of Islamic banks operating in the MENA banking sectors. Interestingly, the impact of monetary freedom is negative implying that higher (lower) monetary policy independence reduces (increases) Islamic banks’ profitability, providing support to the benefits of government interventions.

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  • Fadzlan Sufian, 2014. "The Nexus between Economic Freedom and Islamic Bank Performance: Empirical Evidence from the MENA Banking Sectors," Contemporary Review of the Middle East, , vol. 1(4), pages 411-439, December.
    • Handle: RePEc:sae:crmide:v:1:y:2014:i:4:p:411-439
    DOI: 10.1177/2347798914565874
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    2. Hakimi, Abdelaziz & Hamdi, Helmi & Khemiri, Mohamed Ali, 2023. "Banking in the MENA region: The pro-active role of financial and economic freedom," Journal of Policy Modeling, Elsevier, vol. 45(5), pages 1058-1076.
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    4. Ramlan, Nur Hu Yani, 2017. "Firm Risk and Performance: The Role of Corporate Governance in Bertam Alliance Berhad," MPRA Paper 78378, University Library of Munich, Germany, revised 01 Apr 2017.
    5. Faisal Abbas & Shoaib Ali, 2022. "Is Economic Freedom a Moderator of the Relationship Between Bank Capital and Profitability?," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 69(2), pages 273-292, June.

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