Credit risk and financing structure of Malaysian islamic banks

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12 Citations (Scopus)

Abstract

This study examines the impact of financing structure on Islamic banks' credit risk exposure via four measures: 1) real estate financing; 2) financing specialization; 3) short-term financing structure stability; and 4) medium-term financing structure stability. While controlling the bank-specific variables, our findings indicate that real estate financing and financing structure stability to some extent influence credit risk exposure. However, the significant effects disappear when we incorporated the macroeconomic variables in the framework. This implies that the impact of financing structure on credit risk exposure may be misleading when one ignores the role of macroeconomic fundamentals. Hence, it is hoped that our findings will help the policy makers as well as practitioners do make accurate judgements in the decision making process.

Original languageEnglish
Pages (from-to)83-105
Number of pages23
JournalJournal of Economic Cooperation and Development
Volume31
Issue number3
Publication statusPublished - 2010

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credit
bank
real estate
macroeconomics
decision making process
specialization
Islamic financial institutions
Credit risk
Financing
Risk exposure

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Political Science and International Relations

Cite this

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title = "Credit risk and financing structure of Malaysian islamic banks",
abstract = "This study examines the impact of financing structure on Islamic banks' credit risk exposure via four measures: 1) real estate financing; 2) financing specialization; 3) short-term financing structure stability; and 4) medium-term financing structure stability. While controlling the bank-specific variables, our findings indicate that real estate financing and financing structure stability to some extent influence credit risk exposure. However, the significant effects disappear when we incorporated the macroeconomic variables in the framework. This implies that the impact of financing structure on credit risk exposure may be misleading when one ignores the role of macroeconomic fundamentals. Hence, it is hoped that our findings will help the policy makers as well as practitioners do make accurate judgements in the decision making process.",
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AB - This study examines the impact of financing structure on Islamic banks' credit risk exposure via four measures: 1) real estate financing; 2) financing specialization; 3) short-term financing structure stability; and 4) medium-term financing structure stability. While controlling the bank-specific variables, our findings indicate that real estate financing and financing structure stability to some extent influence credit risk exposure. However, the significant effects disappear when we incorporated the macroeconomic variables in the framework. This implies that the impact of financing structure on credit risk exposure may be misleading when one ignores the role of macroeconomic fundamentals. Hence, it is hoped that our findings will help the policy makers as well as practitioners do make accurate judgements in the decision making process.

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