Performance differences between Islamic and conventional banking forms


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This paper strives to recognize the possible performance differences between the two popular banking forms in the Gulf Cooperation Council (GCC) countries. Applying different methodologies on the data that span the period 2003–2015, this study docu¬ments significant differences with respect to the period, countries, and performance measures. Specifically, conventional banks in GCC countries outperform their Islamic counterparts in profitability. Also, bank specific factors such as liquidity, capital ad¬equacy, bank size and growth all affect the profitability. In addition, GCC conventional and Islamic banks were isolated from the 2008 subprime crisis even though their prof¬itability seems to be decayed differently over the period of the economic downturn.

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    • Table 1. Number of all banks, total assets (in US$), number of conventional banks and the percentage of total assets in conventional banks
    • Table 2. Performance differences between conventional and Islamic banks in the GCC countries
    • Table 3. ROA mean difference before and during the 2008 subprime crisis
    • Table 4. Mean differences of some financial ratios that relate to both conventional and Islamic banks
    • Table 5. The effect of sources of profitability for banks in Kuwait, Saudi Arabia and Emirates (2011–2015)
    • Table 6. The effect of home country, 2008 subprime crisis and bank type on bank profitability of GCC banks (2011–2015)