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Effects of the Global Financial Crisis on the Agency Cost of Islamic Banks and Conventional Banks

Applied Finance and Accounting

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Title Effects of the Global Financial Crisis on the Agency Cost of Islamic Banks and Conventional Banks
 
Creator Aldeehani, Talla M
 
Description In this paper, we investigate the effect of the 2008 global financial crisis on the agency cost (AC) of Islamic banks (IBs) and conventional banks (CBs). Many pioneering scholars (see, for example, Archer et al., 1998) have recognized fundamental differences in the capital structures and risks of IBs compared to CBs and called for more empirical testing of these issues. This effort is in response to those calls. Focusing on AC, we collected data for all Gulf Cooperation Council (GCC) banks satisfying the period from 2001-2014. The data was split into “before” and “after” the 2008 crisis. Although statistically insignificant, the analysis shows higher AC for IB compared to CBs before and after the crisis. However, we provide evidence of significant differences in AC causal models for the two types of banks. For conventional banks, only profitability factors explain variability in AC before and after the crisis. For Islamic banks, however, in addition to profitability, liquidity, deposits and financing facilities matter depending on the status of the economy. We provide further discussions, implications, and recommendations.
 
Publisher Redfame publishing
 
Contributor —
 
Date 2017-11-17
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://redfame.com/journal/index.php/afa/article/view/2799
10.11114/afa.v4i1.2799
 
Source Applied Finance and Accounting; Vol 4, No 1 (2018); 41-53
2374-2429
2374-2410
 
Language eng
 
Relation http://redfame.com/journal/index.php/afa/article/view/2799/3148
 
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