Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks?
Abstract
:1. Introduction
2. Literature Review
3. Data and Methodology
3.1. Data
3.2. Methodology
4. Empirical Findings
4.1. Descriptive Statistics
4.2. Unit Root Test
4.3. Westerlund Panel Cointegration Testing
4.4. Long and Short-Run Causal Relationship
4.5. Robustness Check Controlling for the Arab Spring
4.6. Robustness Check Controlling for Oil Price fall
4.7. Robustness Check Controlling for Oil Price Fall and the Arab Spring
5. Summary and Conclusions
Author Contributions
Funding
Conflicts of Interest
References
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Symbol | Variables | Proxy | Source |
---|---|---|---|
Dependent Variables | |||
ROA | Return On Assets | Net income after tax before unusual items as percentage of total assets (%) | Orbis/Bureau van Dijk |
ROE | Return On Equity | Net income after tax before unusual items as percentage of shareholders’ equity (%) | Orbis/Bureau van Dijk |
NIM | Net Interest Margin | Alteration amid interest revenue and interest expense relative to the amount of assets (%) | Orbis/Bureau van Dijk |
NPM | Net Profit Margin | Net-financing income = (income of financing (-) income distributed to depositors)/total assets (%) | Orbis/Bureau van Dijk |
Independent Variables: Bank Specific Variables: | |||
CAR | Capital Adequacy Ratio | Total equity/Total Assets (%) | Orbis/Bureau van Dijk |
LEV | Leverage | Total liabilities/Total Equity | Orbis/Bureau van Dijk |
CR | Credit Risk | Loans/Total Assets (%) | Orbis/Bureau van Dijk |
Macroeconomic Variables: | |||
INF | Inflation rate | Annual inflation based on consumer price index | World Bank |
OILP | Oil Price | Real price of OPEC basket (USD billion) | OPEC |
GDP | Gross Domestic Product Growth (annual %) | GDP per capita growth (annual %) | World Bank |
Conventional Banks | Islamic Banks | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Variable | Obs | Mean | Std.Dev | Min. | Max | JB p-Value | Obs | Mean | Std.Dev | Min. | Max | JB p-Value |
ROE | 800 | 0.016 | 0.173 | −2.52 | 0.39 | 0.075 | 800 | 0.033 | 0.035 | −0.16 | 0.15 | 0.061 |
ROA | 800 | 0.004 | 0.003 | −0.02 | 0.008 | 0.251 | 800 | 0.049 | 0.63 | −1.36 | 9.27 | 0.922 |
NIM/NPM | 800 | 0.66 | 0.14 | 0.33 | 1.13 | 0.0000 | 800 | 0.88 | 0.48 | 0.11 | 2.86 | 0.0000 |
CR | 800 | 0.15 | 0.026 | 0.06 | 0.22 | 0.132 | 800 | 0.13 | 0.06 | −0.02 | 0.61 | 0.132 |
CAR | 800 | 0.03 | 0.01 | 0 | 0.1 | 0.101 | 800 | 0.04 | 0.03 | 0 | 0.28 | 0.502 |
LEV | 800 | 1.91 | 2.45 | −3.39 | 34.26 | 0.0510 | 800 | 1.38 | 0.66 | −0.25 | 3.85 | 0.010 |
INF | 800 | 0.75 | 0.86 | −1.86 | 4.61 | 0.0000 | 800 | 0.77 | 0.85 | −1.86 | 4.61 | 0.231 |
GDP | 800 | 0.97 | 1.21 | −1.96 | 5.03 | 0.656 | 800 | 0.98 | 1.22 | −1.96 | 5.03 | 0.022 |
OP (Billion US$) | 800 | 19.82 | 6.42 | 8.7 | 30.87 | 0.192 | 800 | 19.79 | 6.43 | 8.7 | 30.87 | 0.898 |
Country | Conventional Bank | Islamic Bank | Total |
---|---|---|---|
UAE | 6 | 5 | 11 |
Qatar | 4 | 4 | 8 |
Bahrain | 3 | 3 | 6 |
Kuwait | 4 | 4 | 8 |
Saudi | 3 | 4 | 7 |
Total | 20 | 20 | 40 |
Conventional Banks | Islamic Banks | |||||||
---|---|---|---|---|---|---|---|---|
Common Unit Root | Individual Unit Root | Common Unit Root | Individual Unit Root | |||||
Variable | LLC t *-Stat. | IPS W-t-Bar Stat | LLC t *-Stat. | IPS W-t-Bar Stat | ||||
Level | 1st Diff. | Level | 1st Diff. | Level | 1st Diff. | Level | 1st Diff. | |
ROE | −4.98 *** | - | −5.69 *** | - | −3.86 *** | - | −1.74 | −5.09 *** |
ROA | −2.16 ** | - | −5.04 *** | - | −6.15 *** | - | −1.71 | −3.59 *** |
NIM/NPM | −4.95 *** | - | −4.14 *** | - | −6.39 *** | - | −1.72 | −3.59 *** |
CR | −2.26 ** | - | −2.42 *** | - | −4.69 *** | - | −1.28 | −4.16 *** |
CAR | −2.32 *** | - | −1.48 *** | - | −4.81 *** | - | −1.62 | −5.34 *** |
Inflation | −10.82 *** | - | −9.13 *** | - | −10.67 *** | - | −2.57 *** | - |
GDP | −5.89 *** | - | −2.94 *** | −5.99 *** | - | −1.49 | −3.72 *** | |
Leverage | −2.74 *** | - | −1.03 | −3.48 *** | −3.21 *** | - | −1.04 | −3.76 ** |
Oil Price | −2.69 *** | - | −0.94 | −3.04 *** | −2.68 *** | - | −0.93 | −3.03 *** |
Conventional Banks | Islamic Banks | |||||
---|---|---|---|---|---|---|
Value | Value | |||||
Test | ROA | ROE | NIM | ROA | ROE | NPM |
Gt | −2.137 | −2.731 ** | −1.823 | −1.606 | −2.309 * | −1.418 |
Ga | −5.817 * | −7.603 * | −5.741 ** | −5.212 ** | −7.408 *** | −3.554 * |
Pt | −9.478 ** | −6.868 * | −5.842 | −4.036 * | −6.475 ** | −7.554 *** |
Pa | 5.211 *** | −4.198 * | −4.428 ** | −2.517 ** | −3.517 ** | −4.212 ** |
Conventional Banks | Islamic Banks | |||||
---|---|---|---|---|---|---|
Dep. Variable | ROA (Model 1) | ROE (Model 2) | NIM (Model 3) | ROA (Model 4) | ROE (Model 5) | NPM (Model 6) |
Long-run coef. | ||||||
CR | 0.011 *** | 5.58 ** | 8.94 *** | 11.53 *** | 0.69 *** | 3.85 *** |
CAR | −0.70 *** | 5.71 ** | −4.103 * | 1.71 ** | −1.82 * | 5.71 *** |
LEV | −0.0006 *** | −0.032 ** | −0.005 | −0.80 *** | 0.003 | −0.02 * |
INF | −0.0001 | −0.074 *** | −0.09 *** | 0.065 *** | −0.26 *** | 0.135 *** |
GDP | −0.0003 *** | 0.007 | 0.03 *** | −0.006 | 0.14 *** | 0.009 |
OP | −0.00029 | −0.012 *** | −0.002 * | −0.0009 | 0.014 *** | −0.009 *** |
Short-run coef. | ||||||
ECT | −0.045 ** | −0.001 | −0.06 ** | −0.010 * | −0.011 ** | −0.034 * |
∆CR | 0.009 | 0.045 | −0.21 | 1.32 | 0.139 | 4.48 |
∆CAR | −0.051 | 0.26 | 17.67 | −5.36 | 1.09 | 6.40 |
∆LEV | −0.0008 | 0.004 | −0.001 | −0.17 | 0.011 | −0.164 |
∆INF | 0.00009 | 0.003 | −0.01 | −0.017 | −0.005 | 0.074 |
∆GDP | 0.0003 | −0.0002 | −0.01 | 0.010 | 0.005 | −0.032 |
∆OP | 0.0002 | 0.0004 * | 0.003 | 0.001 | 0.0002 | 0.006 |
Conventional Banks | Islamic Banks | |||||
---|---|---|---|---|---|---|
Dep. Variable | ROA (Model 7) | ROE (Model 8) | NIM (Model 9) | ROA (Model 10) | ROE (Model 11) | NPM (Model 12) |
Long-run coef. | ||||||
CR | −0.007 | 1.38 *** | 3.21 *** | 4.24 | 0.002 | −1.51 *** |
CAR | 0.019 | −5.70 *** | −4.67 ** | −4.02 | −0.67 *** | 8.28 *** |
LEV | −0.005 *** | 0.084 *** | −0.005 | −0.05 | −0.020 *** | −0.0024 |
INF | 0.0003 *** | −0.017 *** | 0.019 ** | 0.17 | −0.002 *** | 0.144 *** |
GDP | −0.0002 | 0.015 *** | −0.046 *** | −0.26 | 0.005 *** | −0.074 *** |
OP | −0.0002 *** | −0.002 *** | −0.003 *** | −0.032 | −0.0001 | 0.0007 |
Dum_as | −0.002 *** | 0.045 *** | 0.279 *** | −0.96 | 0.024 *** | 0.524 *** |
Short-run coef. | ||||||
ECT | −0.045 * | −0.005 | −0.093 *** | −0.002 | −0.065 *** | −0.006 |
∆CR | −0.003 | 0.027 | 0.069 | 1.39 | 0.22 *** | 4.64 * |
∆CAR | −0.062 | 0.508 | 17.85 | −4.69 | 0.621 | 4.77 |
∆LEV | −0.002 | 0.006 | −0.081 | −0.16 | −0.008 | −0.198 |
∆INF | 0.0002 | 0.002 | −0.029 | −0.013 | 0.001 | 0.089 |
∆GDP | 0.0007 | −0.0002 | 0.009 | 0.009 | 0.001 | −0.022 |
∆OP | −0.00014 | 0.0003 | 0.004 ** | 0.001 | 0.0002 | 0.004 |
∆Dum_as | −0.0006 * | −0.0004 | −0.011 ** | −0.002 | −0.0002 | −0.009 |
Conventional Banks | Islamic Banks | |||||
---|---|---|---|---|---|---|
Dep. Variable | ROA (Model 13) | ROE (Model 14) | NIM (Model 15) | ROA (Model 16) | ROE (Model 17) | NPM (Model 18) |
Long-run coef. | ||||||
CR | −0.015 * | −2.76 *** | 22.06 *** | 11.74 *** | 0.703 ** | −0.994 *** |
CAR | 0.20 *** | −7.05 ** | −0.545 | 2.35 *** | −1.76 * | 15.44 *** |
LEV | −0.0003 *** | 0.002 | −0.013 ** | −0.93 *** | 0.004 | 0.411 *** |
INF | −0.0008 *** | −0.069 *** | −0.048 *** | 0.053 *** | −0.26 *** | 0.109 *** |
GDP | −0.0007 *** | −0.059 *** | 0.059 *** | −0.02 * | 0.135 *** | 0.141 *** |
OP | 0.00011 *** | 0.009 *** | 0.002 | 0.015 *** | 0.014 *** | −0.010 * |
Dum_op | 0.0005 ** | 0.025 | 0.211 *** | 0.27 *** | −0.007 | 0.253 *** |
Short-run coef. | ||||||
ECT | −0.019 | −0.002 | −0.014 | −0.010 | −0.011 ** | −0.035 ** |
∆CR | 0.003 | 0.049 | 0.278 | 1.30 | 0.137 | 4.22 |
∆CAR | −0.161 | 0.179 | 13.43 | −5.51 | 1.089 | 8.97 |
∆LEV | −0.003 | −0.0002 | −0.072 | −0.166 | 0.011 | −0.116 |
∆INF | 0.0002 | 0.001 | −0.018 | −0.017 | −0.005 | 0.075 |
∆GDP | −0.0004 | 0.0003 | −0.002 | 0.010 | 0.005 | −0.040 |
∆OP | −0.0003 | 0.0003 * | 0.004 ** | 0.001 | 0.0002 | 0.006 |
∆Dum_op | −0.0003 | −0.0002 | −0.0005 | −0.005 | −0.0002 | −0.004 |
Conventional Banks | Islamic Banks | |||||
---|---|---|---|---|---|---|
Dep. Variable | ROA (Model 19) | ROE (Model 20) | NIM (Model 21) | ROA (Model 22) | ROE (Model 23) | NPM (Model 24) |
Long-run coef. | ||||||
CR | −0.018 ** | −0.26 *** | 3.18 *** | 4.21 | −0.081 ** | −1.180 *** |
CAR | 0.212 *** | −2.013 *** | −4.41 ** | −3.09 | −0.66 *** | 6.105 *** |
LEV | −0.0003 *** | −0.001 | −0.004 | −0.066 | −0.015 *** | 0.147 *** |
INF | −0.001 *** | −0.016 *** | 0.016 * | 0.148 | −0.003 *** | 0.016 |
GDP | −0.0008 *** | −0.007 *** | −0.045 *** | −0.211 | 0.005 *** | 0.094 *** |
OP | 0.0002 *** | 0.002 *** | −0.008 | −0.016 | 0.0002 | 0.002 |
Dum_as | −0.001 *** | 0.027 *** | 0.263 *** | −10.11 | 0.022 *** | 0.314 *** |
Dum_op | 0.0012 *** | 0.009 ** | 0.028 | 0.293 | 0.004 ** | 0.001 |
Short-run coef. | ||||||
ECT | −0.018 | −0.015 | −0.096 *** | −0.002 | −0.073 *** | −0.045 |
∆CR | 0.003 | 0.065 | 0.096 | 1.386 | 0.225 *** | 40.152 |
∆CAR | −0.16 | −0.513 | 17.34 | −4.69 | 0.583 | 5.900 |
∆LEV | −0.003 | −0.009 | −0.089 | −0.159 | −0.009 | −0.203 |
∆INF | 0.0002 | 0.001 | −0.03 | −0.012 | 0.001 | 0.079 |
∆GDP | 0.0004 | 0.0004 | 0.009 | 0.009 | 0.001 | −0.030 |
∆OP | 0.0003 | 0.0003 | 0.004 ** | 0.0005 | 0.0002 | 0.005 |
∆Dum_as | −0.0002 | −0.0005 * | −0.011 ** | −0.002 | −0.0003 | −0.021 ** |
∆Dum_op | 0.0003 | 0.0007 | −0.004 ** | −0.003 | −0.0008 | −0.003 |
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Esmaeil, J.; Rjoub, H.; Wong, W.-K. Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks? Energies 2020, 13, 3106. https://doi.org/10.3390/en13123106
Esmaeil J, Rjoub H, Wong W-K. Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks? Energies. 2020; 13(12):3106. https://doi.org/10.3390/en13123106
Chicago/Turabian StyleEsmaeil, Jabir, Husam Rjoub, and Wing-Keung Wong. 2020. "Do Oil Price Shocks and Other Factors Create Bigger Impacts on Islamic Banks than Conventional Banks?" Energies 13, no. 12: 3106. https://doi.org/10.3390/en13123106