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A Peer-reviewed scientific articles/A1 Journal article (refereed), original research
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Bank overall financial strength: Islamic versus conventional banks, Economic Modelling August (2017). Doumpos, Michael; Hasan, Iftekhar; Pasiouras, Fotios

Category A Peer-reviewed scientific articles
Sub-category A1 Journal article (refereed), original research
auki Internal authors
All authors as text Doumpos, Michael; Hasan, Iftekhar; Pasiouras, Fotios 
Number of authors
Status Published
Year of publication 2017 
Date 12.05.2017 
Name of article Bank overall financial strength: Islamic versus conventional banks 
Name of journal Economic Modelling
Volume of issue 64 
Number of issue August 
Pages 513-523 
Abstract A number of recent studies compare the performance of Islamic and conventional banks with the use of individual financial ratios or efficiency frontier techniques. The present study extends this strand of the literature, by comparing Islamic banks, conventional banks, and banks with an Islamic window with the use of a bank overall financial strength index. This index is developed with a multicriteria methodology that allows us to aggregate various criteria capturing bank capital strength, asset quality, earnings, liquidity, and management quality in controlling expenses. We find that banks differ significantly in terms of individual financial ratios; however, the difference of the overall financial strength between Islamic and conventional banks is not statistically significant. This finding is confirmed with both univariate comparisons and in multivariate regression estimations. When we look at the bank financial strength within regions, we find that conventional banks outperform both the Islamic banks and the banks with Islamic window in the case of Asia and the Gulf Cooperation Council; however, Islamic banks perform better in the MENA and Senegal region. Second stage regressions also reveal that the bank overall financial strength index is influenced by various country-specific attributes. These include control of corruption, government effectiveness, and operation in one of the seven countries that are expected to drive the next big wave in Islamic finance.
Free text descriptor in Finnish pankkitoiminta; islamilainen pankkitoiminta; 
Free text descriptor in English Bank strength; Islamic banking; Multicriteria 
JEL-codes G21; C44; C53 
ISSN / e-ISSN 0264-9993 
auki Internet addresses
Additional information Available online 12 May 2017.