Financial performance of Islamic and conventional banks during and after US sub-prime crisis in Pakistan: a comparative study
Islamic banking system that is based on Shariah principles is considered more resilient to the financial shocks due to its interest free nature. This study is aimed to compare the financial performances and investigate whether Islamic banks are more profitable, liquid, less risky and operation...
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Main Authors: | , |
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Format: | Article |
Language: | English |
Published: |
Kolej University Islam Sultan Azlan Shah
2015
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Subjects: | |
Online Access: | https://eprints.ums.edu.my/id/eprint/19850/1/Financial%20performance%20of%20Islamic.pdf https://eprints.ums.edu.my/id/eprint/19850/ http://www.gjat.my/gjat122015/9220150502.pdf |
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Summary: | Islamic banking system that is based on Shariah
principles is considered more resilient to the
financial shocks due to its interest free nature.
This study is aimed to compare the financial
performances and investigate whether Islamic
banks are more profitable, liquid, less risky and
operationally efficient compared to conventional
banks during and after US Sub-prime crisis in
Pakistan. The time span used for the study was
from 2007 to 2012. Thirteen financial ratios
composed of five Islamic and five conventional
banks to measure the financial performance in
terms of profitability, risk and solvency, liquidity
and capital adequacy. Independent sample t-test
is used to determine the significance of mean
differences of selected ratios. The results of
profitability measures indicate that Islamic banks
remained less profitable; however, liquidity
performances of Islamic banks were better
than conventional banks. However, overall
operational efficiency measures are not in favour
of Islamic banks. The study concluded that
conventional banks performed more efficiently
and profitably as compared to Islamic banks.
The opportunity of future empirical study is
recommended at the end of this paper. |
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