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Financing modes, risk, efficiency and profitability in Islamic banks: Modeling for the GCC countries

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  • Samir Belkhaoui
  • Naif Alsagr
  • Stefan F. van Hemmen
  • Mohammed M. Elgammal

Abstract

The aim of this research is to develop a conceptual model that includes variables related to financing modes, risk-taking, efficiency, and Islamic bank profitability in GCC Countries. The results indicate that the total effect of financing modes on banks’ profitability is high and statistically significant. The results show that a higher- level of participation in Mudharabah and Musharakah financing will generate high credit risk. Murabahah financing increases, directly and indirectly, the profitability and improve simultaneously the capitalization ratio and the cost efficiency for Islamic banks in the GCC countries. The contribution of our research is on two levels. On the one hand, our study is an addition to the literature that examined the determinants of Islamic banks performance. The conceptual model added risk-taking and cost efficiency as intervening variables in the profit-financing modes relationship. On the other hand, this research uses path analysis method, called second-generation approach, to test the model.

Suggested Citation

  • Samir Belkhaoui & Naif Alsagr & Stefan F. van Hemmen & Mohammed M. Elgammal, 2020. "Financing modes, risk, efficiency and profitability in Islamic banks: Modeling for the GCC countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1750258-175, January.
    • Handle: RePEc:taf:oaefxx:v:8:y:2020:i:1:p:1750258
    DOI: 10.1080/23322039.2020.1750258
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    Cited by:

    1. Saba Iqbal & Safia Nosheen, 2023. "Moderating impact of non-performing loans on the relationship between sustainable development goals and the financial performance of banks," Future Business Journal, Springer, vol. 9(1), pages 1-12, December.
    2. Jamshid ur Rehman & Khalid Hussain & Ishfaq Ahmed & Abdul Latif & Roman Ullah, 2024. "Nexus between Corporate Governance and Bank ‘Risks: Insight from the Commercial Banks in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(2), pages 877-883.
    3. Muhammad Rabiu Danlami & Muhamad Abduh & Lutfi Abdul Razak, 2022. "CAMELS, risk-sharing financing, institutional quality and stability of Islamic banks: evidence from 6 OIC countries," Journal of Islamic Accounting and Business Research, Emerald Group Publishing Limited, vol. 13(8), pages 1155-1175, June.

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