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A Survival Analysis of Islamic and Conventional Banks

Pappas, V., Ongena, S., Izzeldin, M. and Fuertes, A. (2017). A Survival Analysis of Islamic and Conventional Banks. Journal of Financial Services Research, 51(2), pp. 221-256. doi: 10.1007/s10693-016-0239-0

Abstract

Are Islamic banks inherently more stable than conventional banks? We address this question by applying a survival analysis based on the Cox proportional hazard model to a comprehensive sample of 421 banks in 20 Middle and Far Eastern countries from 1995 to 2010. By comparing the failure risk for both bank types, we find that Islamic banks have a significantly lower risk of failure than that of their conventional peers. This lower risk is based both unconditionally and conditionally on bank-specific (microeconomic) variables as well as macroeconomic and market structure variables. Our findings indicate that the design and implementation of early warning systems for bank failure should recognize the distinct risk profiles of the two bank types.

Publication Type: Article
Additional Information: The final publication is available at Springer via http://dx.doi.org/10.1007/s10693-016-0239-0
Publisher Keywords: Islamic banks, Failure risk, Survival analysis, Financial intermediation
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/13598
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