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The impacts of bank-specific and macroeconomic variables on the capital adequacy ratio: evidence from Islamic banks

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  • Wagdi Kalifa
  • Eralp Bektaş

Abstract

The study investigates the relationship between the capital adequacy ratio (CAR) and different bank-specific and macroeconomic variables for 28 Islamic banks. We document that there is a statistically significant positive relationship between the CAR and the bank-specific and macroeconomic variables. In particular, bank-specific variables such as ROA, ROE, leverage, credit risk and size show a strong association with the CAR, while on the macroeconomic side, inflation, market capitalization and exchange rate have an impact on the average Islamic bank in our sample study. Furthermore, we run another model (equity to assets ratio) as dependent, with similar control variables, and the results reveal that, except for inflation, all the variables that have a significant effect on the CAR also influence the equity to assets ratio.

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  • Wagdi Kalifa & Eralp Bektaş, 2018. "The impacts of bank-specific and macroeconomic variables on the capital adequacy ratio: evidence from Islamic banks," Applied Economics Letters, Taylor & Francis Journals, vol. 25(7), pages 477-481, April.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:7:p:477-481
    DOI: 10.1080/13504851.2017.1340559
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    Cited by:

    1. MOHAMMED, Badamasi Idris & NWALA MAUREEN, Nneka & MOHAMMED, Jibril, 2023. "Impact of Liquidity Management on Capital Adequacy Ratio of Listed Deposit Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(12), pages 1762-1774, December.
    2. Jabir Esmaeil & Husam Rjoub & Wing-Keung Wong, 2020. "Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks?," Energies, MDPI, vol. 13(12), pages 1-16, June.
    3. Dania AL-Najjar & Hamzeh F Assous, 2021. "Key determinants of deposits volume using CAMEL rating system: The case of Saudi banks," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-15, December.

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