| By: |
Mohammad Bitar (Department of Finance, John Molson School of Business, Concordia University, 1455 Blvd. de Maisonneuve West, Montréal, Canada);
Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges) |
| Abstract: |
Using a sample of banks operating in 24 countries, we provide robust evidence
that stronger creditor rights are associated with higher capital adequacy
ratios of conventional banks but not of Islamic banks. Such results are more
effective on bank core capital, suggesting that bank managers tend to increase
pure equity to signal better monitoring efforts and avoid losing control in an
environment characterized by strong creditor protection. Except in less
religious countries with less competitive markets, Islamic banks appear to be
less affected by creditor protection possibly because of the profit loss
sharing (PLS) principle that considers depositors as investors who agree to
share profits and losses with the bank, thus making the effect of creditor
protection weaker or irrelevant in an Islamic banking context. JEL
classification: G21, G28, G32, K22 |
| Keywords: |
Creditor rights,market power,religion,bank capital ratios,Islamic banks † Corresponding author |
| Date: |
2018–02–15 |
| URL: |
http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01710016&r=isf |