M PRA Munich Personal RePEc Archive Socioeconomic Development and Its Effect on Performance of Islamic Banks: Dynamic Panel Approaches M. Ashraful Ferdous Chowdhury and M. Mahmudul Haque and Syed Othman Alhabshi and Abul Mansur M. Masih INCEIF, Malaysia and Shahjalal University of Science and Technology, Sylhet, Bangladesh, INCEIF, Malaysia, INCEIF, Malaysia, INCEIF, Malaysia 26 May 2016 Online at https://mpra.ub.uni-muenchen.de/71888/ MPRA Paper No. 71888, posted 9 June 2016 20:08 UTC Chapter 14 Socioeconomic Development and Its Effect on Performance of Islamic Banks: Dynamic Panel Approaches Mohammad Ashraful Ferdous Chowdhury, Md. Mahmudul Haque, Syed Othman Alhabshi, and Abul Mansur Mohammed Masih Abstract ,VODPLFEDQNVDUHKLJKO\LQFRUSRUDWHGZLWKVRFLDOLVVXHVEHFDXVHRIWKHLU UXOHVDQGUHJXODWLRQV3URÀWQRWRQO\GHSHQGVRQLWVRZQUHWXUQDQGLQYHVWPHQWEXW DOVRRQWUXVWPRUDOLVVXHVZKLFKPD\EHPRUHUHODWHGWREDQNLQJSURÀWDELOLW\7R test these gaps, this chapter attempts to investigate the socioeconomic factors along ZLWK EDQNVSHFLÀF IDFWRUV RI JOREDO ,VODPLF EDQNV XVLQJ G\QDPLF *00 DQG Quantile regression. The dataset used in this study involves 55 full-fledged Islamic %DQNVIURPFRXQWULHVDFURVVWKHJOREH7KHUHVXOWVVXJJHVWWKDW5HWXUQRQ$VVHWV 52$LVVLJQLÀFDQWO\SRVLWLYHWREDQNVSHFLÀFIDFWRUVVXFKDVFUHGLWULVNKDVDQG statistically negative to cost-to-income ratio. It is also suggested that the relationVKLSEHWZHHQULVNDQGUHWXUQLVKHWHURJHQHRXVRUGLVVLPLODUDFURVVGLIIHUHQWTXDQtiles. Findings of the study tend to unravel that the socioeconomic factors especially SROLWLFDOVWDELOLW\DQGLQYHVWPHQWIUHHGRPKDYHSRVLWLYHDQGVLJQLÀFDQWUHODWLRQWR WKH,VODPLFEDQNSHUIRUPDQFH Keywords 52$6RFLRHFRQRPLFIDFWRUV&UHGLWULVN'\QDPLF*004XDQWLOH regression 14.1 Introduction 5LVNVKDULQJLVDXQLTXHFKDUDFWHULVWLFLQWKH,VODPLFÀQDQFLDOV\VWHPWKDWSURYLGHV WKHÀQDQFLDOVWDELOLW\HQULFKHGÀQDQFLDOLQFOXVLRQOHDGLQJWRVXVWDLQDEOHGHYHORSPHQW+RZHYHUWKHLPSOHPHQWDWLRQRIWKHULVNVKDULQJFRQFHSWGHSHQGVRQDIHZ M.A.F. Chowdhury (*) INCEIF and Shahjalal University of Science and Technology, Sylhet, Bangladesh e-mail: [email protected] 00+DTXH62$OKDEVKL$000DVLK INCEIF, Lorong Universiti A, Kuala Lumpur 59100, Malaysia © Springer International Publishing Switzerland 2016 M. Zulkhibri et al. (eds.), Macroprudential Regulation and Policy for the Islamic Financial Industry, DOI 10.1007/978-3-319-30445-8_14 229 230 M.A.F. Chowdhury et al. SUHUHTXLVLWHV VXFK DV WUDQVSDUHQF\ DQG DFFRXQWDELOLW\ JRRG JRYHUQDQFH FRQWDFWV enforcement, effective monitoring, well-structured economic institutions, and effiFLHQW ÀQDQFLDO PDUNHWV 8QIRUWXQDWHO\ WKH FXUUHQW VWDWH RI DIIDLUV VKRZV WKDW D PDMRULW\RIWKH2UJDQL]DWLRQRI,VODPLFFRRSHUDWLRQ2,&FRXQWULHVGRQRWPHHW these prerequisites (Ng et al. 2015,WLVQRZEHLQJLQFUHDVLQJO\UHDOL]HGWKDWWKH ,VODPLFEDQNVPD\EHDQDOWHUQDWLYHWRFRQYHQWLRQDOEDQNVSDUWLFXODUO\GXULQJWKH FULVLVSHULRGVDVUHÁHFWHGLQWKHUDSLGJURZWKRI,VODPLFEDQNLQJVLQFHWKHUHFHQW ÀQDQFLDOFULVHV7KHDPRXQWRIULVNIDFHGE\EDQNVLVXVXDOO\RIJUHDWFRQFHUQWRWKH SROLF\PDNHUV 8QOLNHWKHFRQYHQWLRQDOEDQNV,VODPLFEDQNVSURPRWHULVNVKDULQJSULQFLSOHVE\ using many investment tools such as Mudarabah and Musharakah'XHWRWKHG\QDPLVPRIGLIIHUHQWFRQWUDFWVLWLVJHQHUDOO\SHUFHLYHGWKDWWKHULVNLVFRPSDUDWLYHO\ KLJKHULQ,VODPLFEDQNVFRPSDUHGWRWKHLUFRQYHQWLRQDOFRXQWHUSDUWV,WLVXVXDOO\ DUJXHG WKDW ,VODPLF %DQNV KDYH KLJKHU GHJUHH RI FUHGLW ULVNV WKDQ LQWHUHVWEDVHG EDQNVPDLQO\EHFDXVHRIWKHLUQDWXUHRIWUDGHEDVHGLQYHVWPHQW8SXQWLOQRZWKH ULVNUHWXUQUHODWLRQVKLSH[DPLQHGE\SUHYLRXVUHVHDUFKHUVZDVIRXQGWREHSRVLWLYH negative, or curvilinear (Nwude 20127KHUREXVWJURZWKLQÀQDQFLQJDQGLQYHVWment activities across most jurisdictions in various real sectors has helped Islamic EDQNV UHFRUG JHQHURXV DVVHW JURZWK UDWHV LQ WKHLU EDODQFH VKHHWV +RZHYHU WKH UHWXUQVEHFDPHVXEGXHGGXULQJWKHÀQDQFLDOFULVLVRI\HDUVRI²UHDFKLQJ ORZVRI52$DQG52(LQ,)6%6LQFH,VODPLFEDQNVDUH SDUWLFLSDWRU\EDVHGLWFRXOGEHVDLGWKDWWKLVVXEGXHG,VODPLFEDQNLQJSHUIRUPDQFH LVQRWRQO\FDXVHGE\WKHÀQDQFLDOGRZQWXUQEXWDOVRE\VRFLRHFRQRPLFLQVWDELOLW\ VXFKDV$UDE6SULQJ In any economy, socioeconomic freedom is a major dimension, which will affect EDQNSHUIRUPDQFH7KHUROHRIVRFLRHFRQRPLFIUHHGRPKDVDVVXPHGDGHYHORSPHQWDOFKDUDFWHULQFDSLWDOPDUNHWVIROORZLQJWKHOLEHUDOL]DWLRQRIVWRFNPDUNHWV,QD setting which reflects socioeconomic freedom fluctuating widely across countries, LQYHVWRUVZRUOGZLGHLQHTXLW\PDUNHWVSHUFHLYHLWDVIDVFLQDWLQJWRVSRWDWWUDFWLYH investment opportunities. 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EDQNVWKDWDUHPRUHSURGXFWLYHDQGHIÀFLHQWVKRXOGNHHSWKHLURSHUDWLQJFRVWORZ %HQ1DFHXUDQG*RDLHG) and Hassan and Bashir (2003) have found a positive LPSDFWRQWKHSHUIRUPDQFHRIWKH,VODPLFEDQNVZKHUHDV.RVPLGRXHWDO2005) KDYHIRXQGDQHJDWLYHUHODWLRQWRWKHSHUIRUPDQFHRIWKHEDQNV 0RUHRYHU D VWXG\ FRQGXFWHG E\ $KPDG DQG $KPDG ) on Malaysian ,VODPLFEDQNVFUHGLWULVN7KHVWXG\FRQFOXGHVWKDWDVVHWVVL]HULVN\DVVHWVUDWLR DQG,VODPLFEDQNVPDQDJHPHQWHIÀFLHQF\HIIHFWZHUHIRXQGVWDWLVWLFDOO\VLJQLÀFDQWRQ ,VODPLFEDQNVFUHGLWULVN,QWKH0LGGOH(DVWDVWXG\FRQGXFWHGE\%DVKLU2003) H[DPLQHGWKHLQWHUQDOYDULDEOHVDQGHFRQRPLFHQYLURQPHQWLPSDFWRQWKHSHUIRUPDQFHRI,VODPLFEDQNV7KHVWDWLVWLFDOO\VLJQLÀFDQWDQGSRVLWLYHUHODWLRQVKLSZDV IRXQGEHWZHHQFDSLWDODGHTXDF\DQGSURÀWDELOLW\RI,VODPLFEDQNV7KHUHVHDUFKHU DOVRFRQFOXGHGIURPWKHVWXG\WKDWIRUHLJQHUVRZQHG,VODPLFEDQNVKDYHDELOLW\WR DWWDLQKLJKHUSURÀWUDWLRWKHQWKHEDQNVORFDOO\RZQHG7KHSRVLWLYHLPSDFWDQGVWDWLVWLFDOO\VLJQLÀFDQWUHODWLRQVKLSRILQÁDWLRQZDVDOVRIRXQGRQWKHSURÀWDELOLW\RI 0LGGOH(DVW,VODPLFEDQNV )URPWKHVRFLRHFRQRPLFSHUVSHFWLYHVWKHUHKDYHEHHQDQXPEHURIVWXGLHVZKLFK H[SORUHWKDWVRFLRHFRQRPLFIUHHGRPLQÁXHQFHVHFRQRPLFJURZWK+HFNHOPDQDQG .QDFN2009$OWPDQ3RZHOO2002$GNLQVHWDO20025HHGRPDQG5RZWK 2000 7KH ÀQGLQJV IURP PRVW RI WKH VWXGLHV UHYHDO WKDW WKHUH H[LVWV D SRVLWLYH LPSDFWRIYDULRXVPHDVXUHVRIHFRQRPLFIUHHGRPRQHFRQRPLFJURZWK5HPDUNDEO\ DEVHQWLQWKHOLWHUDWXUHLVDQH[DPLQDWLRQRIWKHOLQNVEHWZHHQHFRQRPLFIUHHGRP DQG EDQN SHUIRUPDQFH 7KH OLPLWHG UHVHDUFK LQ WKLV DUHD LV VRPHZKDW VXUSULVLQJ JLYHQWKHLPSRUWDQFHRIEDQNVSHFLÀFIDFWRUVLQSURPRWLQJHFRQRPLFGHYHORSPHQW (Chinn and Ito /HYLQHDQG=HUYRV) and the impact of socioeconomic IUHHGRPLVDOVROLNHO\WRKDYHHIIHFWRQWKHEDQNLQJVHFWRU$GGLWLRQDOO\RQWKHHFRQRPLFIUHHGRPLQGH[HVH[WHQVLYHHPSLULFDOVWXGLHVKDYHEHHQSURGXFHG&KRUWDUHDV et al. 2013). 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($V0DPDW]DNLVDQG 5HPRXQGRV2003) argue dynamic model uses more information and consequently WKHGHWHUPLQDQWIDFWRUVZLOOEHHVWLPDWHGPRUHHIÀFLHQWO\,QWKLVVWXG\ERWKVWDWLF and dynamic models are applied. Table 14.1 9DULDEOHGHVFULSWLRQ 9DULDEOH 35 CPI 6= //5*/ 'HÀQLWLRQ 3URÀWDELOLW\RIEDQNV &RUUXSWLRQSHUFHSWLRQLQGH[ %DQNVL]H &UHGLWULVN 32/6 IF 35 &,5 3ROLWLFDOVWDELOLW\ Investment freedom Property rights Cost-to-income ratio 'HVFULSWLRQ 5HWXUQRQDVVHWV52$ 5DQJHVIURPWR Natural log of total asset /RDQORVVSURYLVLRQ*URVVORDQIRUHDFK\HDU averaged 5DQJHVIURPïZHDNWRVWURQJ 7KH,QYHVWPHQWIUHHGRPLQGH[² 7KHSURSHUW\ULJKWVLQGH[² It refers the operational efficiency of a firm M.A.F. Chowdhury et al. 14.3.3 Static Models (Fixed and Random Effects) 7KHSDQHOGDWDLVXVHGLQDQDO\]LQJWKHEDQN·VSRUWDELOLW\GHWHUPLQDQWV,QWKHSDQHO data, the used model consists nFURVVVHFWLRQDOXQLWVGHQRWHGE\n = 1, NREVHUYHG at each of T time periods, t = 1, …, T,QGDWDVHWWKHWRWDOREVHUYDWLRQLVn × T. 7KHEDVLFIUDPHZRUNIRUWKHSDQHOGDWDLVGHÀQHGDVSHUWKHIROORZLQJUHJUHVVLRQ model: Ynt = a + b X nt + e nt ZKHUHWKHGHSHQGHQWYDULDEOH3URÀWDELOLW\LVGHQRWHGE\ynt. Intercept term used is GHQRWHGE\αRQWKHH[SODQDWRU\YDULDEOHVβ is a kðYHFWRURISDUDPHWHUWREH HVWLPDWHGDQGYHFWRURIREVHUYDWLRQVLVXnt which is 1 × k, t = 1, … , Tn = 1, … N. The econometric specifications: ROA = a + b 1 CIR + b 2 LTA + b 3 LLRGL + b 4 COR + b 5 IFL + b 6 PR + e where YLVUHWXUQRQDVVHWV52$&,5LVFRVWWRLQFRPHUDWLR/7$LVQDWXUDOORJ RI WRWDO DVVHWV //5*/ LV ORDQ ORVV UHVHUYH RYHU JURVV ORDQ &25 LV FRUUXSWLRQ 32/6LVSROLWLFDOVWDELOLW\,),LVLQYHVWPHQWIUHHGRP35LVSURSHUW\ULJKWVDQGε is error term. 14.3.4 Dynamic GMM Models ,Q EDQNLQJ OLWHUDWXUH À[HG DQG UDQGRP HIIHFWV PRGHOV DUH XVXDOO\ HPSOR\HG IRU SDQHO GDWD +RZHYHU LW LV DUJXHG WKDW SHUVLVWHQFH RI EDQN SURÀWDELOLW\ RYHU WLPH FRXOGDIIHFWQH[W\HDU·VSURÀW$WKDQDVRJORXHWDO). As a result a difficulty DULVHV ZLWK WKHVH PRGHOV ZKHQ D ODJJHG GHSHQGHQW YDULDEOH RU SRVVLEO\ RWKHU UHJUHVVRU LV FRQFHUQHG SDUWLFXODUO\ LQ WKH FRQWH[W RI YHU\ IHZ WLPH SHULRGV DQG PDQ\REVHUYDWLRQV1LFNHOO). To address this issue, Arellano and Bond (1991) GHYHORSWKHGLIIHUHQFH*00PRGHOE\GLIIHUHQFLQJDOOUHJUHVVRUVDQGHPSOR\LQJ *00+DQVHQ). Arellano and Bover (1995) and Blundell and Bond (2000) augment the differHQFH*00PRGHOE\GHYHORSLQJWKHV\VWHP*00HVWLPDWRUZKLFKLQFOXGHVODJJHG OHYHOVDVZHOODVODJJHGGLIIHUHQFHV7KHV\VWHP*00HVWLPDWRUDVVXPHVWKDWÀUVW GLIIHUHQFHV RI LQVWUXPHQWDO YDULDEOHV DUH XQFRUUHODWHG ZLWK WKH À[HG HIIHFWV ,W DOORZV WKH LQWURGXFWLRQ RI PRUH LQVWUXPHQWV DQG FDQ VXEVWDQWLDOO\ LPSURYH HIÀFLHQF\ 5RRGPDQ DPRQJ RWKHUV DUJXHV WKDW ERWK GLIIHUHQFH DQG V\VWHP *00HVWLPDWRUVDUHVXLWDEOHIRUVLWXDWLRQVZLWK´VPDOO7ODUJH1µSDQHOVLQGHSHQGHQWYDULDEOHVWKDWDUHQRWVWULFWO\H[RJHQRXVÀ[HGLQGLYLGXDOHIIHFWVKHWHURVNHGDVWLFLW\ DQG DXWRFRUUHODWLRQ DPRQJ LQ WKLV VWXG\ LQGLYLGXDO EDQNV +RZHYHU WKH GLIIHUHQFH *00 HVWLPDWRUV FDQ EH VXEMHFW WR VHULRXV ÀQLWH VDPSOH ELDVHV LI WKH 14 Socioeconomic Development and Its Effect on Performance of Islamic Banks… 235 LQVWUXPHQWVXVHGKDYHQHDUXQLWURRWSURSHUWLHV8VHRIWKHV\VWHP*00UHVXOWVLQ QRWDEO\ VPDOOHU ÀQLWH VDPSOH ELDV DQG PXFK JUHDWHU SUHFLVLRQ ZKHQ HVWLPDWLQJ autoregressive parameters using persistent series (Bond 2002). In addition, The *00 V\VWHP FRQWUROV IRU XQREVHUYHG KHWHURJHQHLW\ DQG IRU SHUVLVWHQFH RI WKH GHSHQGHQWYDULDEOH7KHIROORZLQJIRUPXODIRU*00SURSRVHGE\$WKDQDVRJORX et al. () is used to conduct the empirical analysis: j =1 m =1 j m II t = C + d II i , t -1 + å b j X j it + å b j X m it + e it where IItLVWKHSUREDELOLW\RIEDQNi at time t where i = 1 … N, t = 1, C is the Constant Term. II i ,t -1 LVWKHODJYDOXHRIGHSHQGHQWYDULDEOHXitLVWKHH[SODQDWRU\YDULDEOHV and εitWKHGLVWXUEDQFHWHUPZLWKvitWKHXQREVHUYHGEDQNVSHFLÀFHIIHFWDQGuit the idiosyncratic error. This is a one-way component regression model, where vet ~ IIN (0, σv2) and independent of uit ~ (0, σu2). The XitLVJURXSHGLQWREDQNVSHFLÀFXjit and PDFURHFRQRPLFYDULDEOHXmit. 14.3.5 Quantile Regression (QR) Model 7KLVVWXG\HPSOR\VD45PRGHOLQZKLFKWKHSDUDPHWHURIH[SODQDWRU\YDULDEOHV FDQEHH[SUHVVHGDVDPRQRWRQHIXQFWLRQRIDVLQJOHVFDODUUDQGRPYDULDEOH7KH PRGHOFDSWXUHVV\VWHPDWLFLQÁXHQFHVRIFRQGLWLRQLQJYDULDEOHVRQORFDWLRQVFDOH DQGVKDSHRIWKHFRQGLWLRQDOGLVWULEXWLRQRIWKHUHVSRQVH7KHPRGHOLVWKXVVLJQLÀFDQWO\H[WHQGHGZLWKDFRQVWDQWFRHIÀFLHQWLQZKLFKWKHHIIHFWVRIFRQGLWLRQLQJDUH confined to a location shift. Furthermore, this study reveals that traditional optimi]DWLRQWHFKQLTXHVLQFOXGLQJ2/6DQG/$'GLVUHJDUGGLIIHUHQWEHKDYLRUVLQWKHWDLO UHJLRQVRIEDQNSURÀWDELOLW\GLVWULEXWLRQVDQGWKHULVN²UHWXUQUHODWLRQVKLSVLQEDQNV FKDQJHLQWKHWDLOUHJLRQV)ROORZLQJWKLVOLQHRIWKRXJKWD45WHFKQLTXHGHYHORSHG E\.RHQNHUDQG%DVVHWWLVXVHGLQWKLVVWXG\WRH[DPLQHWKHG\QDPLFUHODWLRQVKLSEHWZHHQWKHULVNDQGEDQNSURÀWDELOLW\SHUIRUPDQFH Assuming that the θWKTXDQWLOHRIWKHFRQGLWLRQDOGLVWULEXWLRQRIWKHH[SODLQHG YDULDEOHLVOLQHDULQx where Quant XiWKHFRQGLWLRQDO45PRGHOFDQEHH[SUHVVHG as follows: Yi = x ’i × bq + uq i Quantq ( yi | xi ) = inf { y : Fi ( y | x )q } = x ’i × bq Quantq ( uq i | xi ) = 0 where Quantθ (yi│xi) represents the θ the conditional quantile of yi on the regressor vector xiβθLVWKHXQNQRZQYHFWRURISDUDPHWHUVWREHHVWLPDWHGIRUGLIIHUHQWYDOXHV of θLQuθiLVWKHHUURUWHUPDVVXPHGWREHFRQWLQXRXVO\GLIIHUHQWLDEOHFGI (cumulative density function) of F i(y│x)θ and a density function F i(y│x)θ. M.A.F. Chowdhury et al. The value Fi(y│x)θ GHQRWHV WKH FRQGLWLRQDO GLVWULEXWLRQ RI y conditional on x. 9DU\LQJWKHYDOXHRIuIURPWRUHYHDOVWKHHQWLUHGLVWULEXWLRQRIy conditional on x. The estimator for uLVREWDLQHGIURP i :u >= 0 min åq x uq + i :u <= 0 n = å å 1-q x uq i n q x yi - x ’i × bq + i : yi - x ’i . b >= 0 å (1 - q ) x | yi - x ’i × bq i : yi - x ’i . b <= 0 14.4 Results and Discussion 14.4.1 Descriptive Study 7RDQDO\]HWKHUHVXOWRIWKHVWXG\ÀUVWLWLVXVHIXOWRFRPPHQWRQVRPHSUHOLPLQDU\ IHDWXUHVRIRXUGDWD7DEOHVKRZVGHVFULSWLYHVWDWLVWLFVIRUWKHSURÀWDELOLW\52$ DQGWKHEDQNVSHFLÀ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less than the standard level. Table 14.2 'HVFULSWLYHVWDWLVWLFV Mean Median 0D[ Min. 6WG'HY 6NHZQHVV Kurtosis 2EV 52$ ï 3.39320 ï 220 &,5 10.5000 220 LTA 1.55505 ï 220 //5*/ 3.55500 100.000 0.00000 220 &25 ï 220 32/6 ï ï ï ï 220 IF 90.000 0.0000 220 35 50.000 90.000 10.000 220 Notes7KHGHSHQGHQWYDULDEOH52$LVFDOFXODWHGDVQHWSURÀWGLYLGHGE\WRWDODVVHWV&,5³WKH FRVWWRLQFRPHUDWLRLVXVHGDVDSUR[\IRURSHUDWLQJHIÀFLHQF\//5*/LVDPHDVXUHRIFUHGLWULVN FDOFXODWHGDVWKHUDWLRRIWRWDOORDQORVVSURYLVLRQVE\*URVVORDQ/2*7$LVDSUR[\PHDVXUHRI VL]HFDOFXODWHGDVDQDWXUDOORJDULWKPRIWRWDOEDQNDVVHWV32/PHDVXUHVWKHSROLWLFDOVWDELOLW\,) LQGLFDWHVWKH,QYHVWPHQWIUHHGRPDQG35UHIHUVWKH3URSHUW\ULJKWV 14 Socioeconomic Development and Its Effect on Performance of Islamic Banks… 14.4.2 Correlation Matrix $FFRUGLQJWR7DEOHWKHORDQORVVSURYLVLRQWRJURVVUHYHQXHVVHHPVWREHQHJDWLYHO\FRUUHODWHGZLWKWKHSURÀWDELOLW\PHDVXUHLQGLFDWLQJWKDWZKHQWKHORDQORVV SURYLVLRQV LQFUHDVH SURÀWDELOLW\ PRYHV WR WKH RSSRVLWH GLUHFWLRQ E\ ï $V H[SHFWHG FRVWWRLQFRPH UDWLR RYHUKHDG H[SHQVHV LV QHJDWLYHO\ FRUUHODWHG ZLWK SURÀWDELOLW\ZLWKDFRUUHODWLRQRIï&RQWLQXLQJWRWKHFRUUHODWLRQVRIEHWZHHQ WRWDODVVHWVDQG52$LVSRVLWLYHO\FRUUHODWHGZLWKE\2QWKHRWKHUKDQG VRFLRHFRQRPLFYDULDEOHVVXFKDV&RUUXSWLRQSROLWLFDOVWDELOLW\LQYHVWPHQWIUHHGRP DQGSURSHUW\ULJKWVDUHQHJDWLYHO\UHODWHGWR52$$ZLWKïïï DQGïUHVSHFWLYHO\)LQDOO\VLQFHWKHUHLVQRYDOXHPRUHWKDQZHFDQ VD\WKDWWKHUHVKRXOGQRWEHDQ\PXOWLFROOLQHDULW\ 14.4.3 Empirical Findings Before estimating the static and dynamic model in panel techniques, this study H[DPLQHVWKHSDQHOXQLWURRWWHVWDQGSDQHOFRLQWHJUDWLRQWHVW,WKDVEHHQIRXQGWKDW GDWDDUHQRQVWDWLRQDU\DWWKHOHYHOIRUPDQGLWEHFRPHVVWDWLRQDU\DIWHUXVLQJÀUVW OHJ,WLVDOVRIRXQGWKDWUHODWLRQVKLSVDPRQJYDULDEOHVDUHQRWVSXULRXV 6LQFHWKHSUREDELOLW\RI&KLVTXDUHYDOXHRI+DXVPDQWHVWZLWK3YDOXH WKLVFKDSWHUZLOOJLYHPRUHIRFXVRQUDQGRPHIIHFW+HUH7DEOH provides the estimation results of the random effect model. We can see that although variDEOHVOLNHFRUUXSWLRQDQGSURSHUW\ULJKWVDUHLQVLJQLÀFDQWQRZH[KLELWPRUHLQWXLWLYHO\SODXVLEOHSRVLWLYHGLUHFWLRQRILQÁXHQFH(YHQWKRXJKWKHRYHUDOO3URWHFWLQJ ,QYHVWRUV,QGH[UHWDLQVSRVLWLYHVLJQWKUHHRILWVVHYHQFRPSRQHQWVQRZKDYHQHJDWLYH HIIHFW 7KH QH[W FUHGLW ULVN SURFHGXUHV H[KLELW SRVLWLYH VLJQ FRQÀUPLQJ WKH Table 14.3 &RUUHODWLRQPDWUL[ 52$$ &,5 LTA //5*/ &25 32/6 IF 35 52$$ 1.0000 ï ï ï ï ï ï &,5 LTA //5*/ &25 32/6 IF 35 1.0000 ï 0.2309 1.0000 ï ï 1.0000 ï ï 0.0211 ï 1.0000 0.3993 1.0000 0.5519 1.0000 1.0000 Notes7KHGHSHQGHQWYDULDEOH52$LVFDOFXODWHGDVQHWSURÀWGLYLGHGE\WRWDODVVHWV&,5³WKH FRVWWRLQFRPHUDWLRLVXVHGDVDSUR[\IRURSHUDWLQJHIÀFLHQF\//5*/LVDPHDVXUHRIFUHGLWULVN FDOFXODWHGDVWKHUDWLRRIWRWDOORDQORVVSURYLVLRQVE\*URVVORDQ/2*7$LVDSUR[\PHDVXUHRI VL]HFDOFXODWHGDVDQDWXUDOORJDULWKPRIWRWDOEDQNDVVHWV32/PHDVXUHVWKHSROLWLFDOVWDELOLW\,) LQGLFDWHVWKH,QYHVWPHQWIUHHGRPDQG35UHIHUVWKH3URSHUW\ULJKWV M.A.F. Chowdhury et al. Table 14.4 Model estimations )L[HGHIIHFWV ² 5DQGRP effects 1.1915 ² First step GLIIHUHQFHG*00 Second step GLIIHUHQFHG*00 ï ï ï ï ï ï ï ² ï ï ï ² ï ï ² χ2 3URE!χ2 $5WHVW F VWDW ² ï ï ï ² χ2 3URE!χ2 ² $5WHVW ² ² 1RREVHUYDWLRQV 220 220 Z p Z p = 0.5190 220 Z p Z p 220 9DULDEOHV Intercept 52$$³ODJRI GHSHQGHQWYDULDEOH LTA //5*/ &,5 &25 32/6 35 IF 5VTXDUHG Sagan test F-stat/Wald-χ2 Notes7KHGHSHQGHQWYDULDEOH52$LVFDOFXODWHGDVQHWSURÀWGLYLGHGE\WRWDODVVHWV&,5³WKH FRVWWRLQFRPHUDWLRLVXVHGDVDSUR[\IRURSHUDWLQJHIÀFLHQF\//5*/LVDPHDVXUHRIFUHGLWULVN FDOFXODWHGDVWKHUDWLRRIWRWDOORDQORVVSURYLVLRQVE\*URVVORDQ/2*7$LVDSUR[\PHDVXUHRI VL]HFDOFXODWHGDVDQDWXUDOORJDULWKPRIWRWDOEDQNDVVHWV32/PHDVXUHVWKHSROLWLFDOVWDELOLW\,) LQGLFDWHV WKH ,QYHVWPHQW IUHHGRP DQG 35 UHIHUV WKH 3URSHUW\ ULJKWV 9DOXHV LQ SDUHQWKHVLV DUH t VWDWLVWLFVDQGLQGLFDWHVLJQLÀFDQFHDWDQGOHYHOUHVSHFWLYHO\ WKHRUHWLFDOSUHGLFWLRQV)LQDOO\SROLWLFDOVWDELOLW\DQGLQYHVWPHQWIUHHGRPRIVRFLRHFRQRPLFIUHHGRPLQGLFDWRUVUHYHDOQHJDWLYHHIIHFWVRQEDQNLQJSHUIRUPDQFH 2QWKHRWKHUKDQGFRVWWRLQFRPHUDWLRLVKLJKO\QHJDWLYHO\VLJQLÀFDQWZKLFKLV FRQÀUPHGE\WKHWKHRUHWLFDOSUHGLFWLRQ,WLVIRXQGQHJDWLYHDQGVLJQLÀFDQWLPSDFWRQ WKHSURÀWDELOLW\RI,VODPLFEDQNVHYHQDWVLJQLÀFDQWOHYHOLQDOOWKHDERYHPRGHOV $LQFUHDVHVLQWKHFRVWRIWKH,VODPLFEDQNPD\UHGXFH52$RI,VODPLF EDQNV 5HIHUULQJ WR WKH LPSDFW RI FUHGLW ULVN LW LV IRXQG SRVLWLYH DQG VLJQLÀFDQW LPSDFWRQWKHSURÀWDELOLW\RI,VODPLFEDQNVHYHQDWVLJQLÀFDQWOHYHOLQDOOWKH DERYHPRGHOV7KLVUHVXOWLPSOLHVWKDWLQFUHDVHGHFUHDVHLQWKLVFUHGLWULVNLQFUHDVH GHFUHDVHWKHSURÀWVRI,VODPLFEDQNVRSHUDWLQJLQWKH,VODPLFEDQNLQJVHFWRU $VDOUHDG\GLVFXVVHGWKHHVWLPDWRUVRIWKLVPRGHOVWLOOVXIIHUIURPELDVGXHWRWKH ODFNRIG\QDPLFUHODWLRQVKLSEHWZHHQODJJHGGHSHQGHQWYDULDEOH6LQFH*00FDQ VROYHRQO\WKH´À[HGHIIHFWµSUREOHPEXWÀ[LQJWKHSUREOHPRI´FRUUHODWLRQEHWZHHQ WKH ODJJHG GHSHQGHQW YDULDEOH DQG WKH HUURU WHUPµ DQG ´WKH HQGRJHQHLW\ RI VRPH H[SODQDWRU\YDULDEOHVµSUREOHPVWKLVVWXG\DSSOLHGWKHVWHSDQGVWHSGLIIHUHQFHG *00 7KH QH[W WZR FROXPQV RI WKH WDEOH VKRZ ÀQGLQJV RI *00 HVWLPDWLRQV 14 Socioeconomic Development and Its Effect on Performance of Islamic Banks… 239 &ROXPQIRXUGHVFULEHVUHVXOWVRIGLIIHUHQFH*00HVWLPDWLRQ$OORIWKHLQGLFDWRUV KDYHVLJQLÀFDQWH[SODQDWRU\SRZHUPRUHRYHUWKHVLJQVRIWKHHVWLPDWHVPRVWO\FRQform to its theoretical predictions almost in every case. 7KHVHUHVXOWVFRQÀUPWKHWKHVLVRISRVLWLYHLQÁXHQFHRILQVWLWXWLRQDOYDULDEOHVRQ the financial sector. Therefore, we can infer that institutional quality, including speFLÀFEDQNGHWHUPLQDQWVDQGEURDGHUVRFLRHFRQRPLFIUHHGRPLQGLFDWRUVDUHVLJQLÀFDQWGHWHUPLQDQWVRIEDQNSHUIRUPDQFHOHYHO,WVKRXOGDOVREHPHQWLRQHGWKDWWKH HVWLPDWRUV KDUGO\ UHPDLQ LQ WKH ERXQGDU\ EHWZHHQ 5DQGRP (IIHFWV DQG )L[HG (IIHFWV ,Q WKH QH[W VWHS VWHS GLIIHUHQFH *00 HVWLPDWLRQV DUH XVHG IRU PRUH DFFXUDWHUHVXOWVDQGLQIHUHQFH2YHUDOOXVLQJERWKÀUVWGLIIHUHQFHDQGVHFRQGGLIIHUHQFH*00PHWKRGVWKLVFKDSWHUÀQGVWKDWWKHYDULDEOHVH[KLELWFRUUHFWGLUHFWLRQRI influence. The magnitudes of which are not overly sensitive to change in specificaWLRQVEHWZHHQÀUVWGLIIHUHQFHDQGVHFRQGGLIIHUHQFH*00 14.4.4 Quantile Regression 7DEOHOLVWVWKHHVWLPDWLRQUHVXOWVRIWKH45PRGHOIRUWKHLPSDFWRIWKHEDQN VSHFLÀFYDULDEOHVDQGVRFLRHFRQRPLFYDULDEOHVRQWKH52$)RUFRPSDULVRQWKH 2/6HVWLPDWHVDUHDOVRSUHVHQWHG+HUHERWK2/6DQGWKHTXDQWLOHUHJUHVVLRQDW WKUHHGLIIHUHQWTXDQWLOHKDYHEHHQVWXGLHG,QWHUHVWLQJO\WKHUHVXOWRI2/6YDULHVDW different percentile especially loan-loss reserve and total assets, etc. The result indiFDWHVWKDWDVPRUHULVNVDUHWDNHQE\DEDQNPRUHPRQH\FRXOGEHPDGH+RZHYHU WKH2/6HVWLPDWRUE\IRFXVLQJRQO\RQWKHFHQWUDOWHQGHQF\RIWKHGLVWULEXWLRQV Table 14.5 Quantile regression at different percentiles LTA //5*/ &,5 &25 32/6 35 IF _cons 2/6BUHV EVH ï 0.052 ï ï ï p < 0.01 Q25_res EVH 0.000 ï ï ï ï ï Q50_res EVH 0.090 ï ï 1.519 p < 0.001 4BUHV EVH 0.090 ï ï 0.030 ï 2.010 Notes7KHGHSHQGHQWYDULDEOH52$LVFDOFXODWHGDVQHWSURÀWGLYLGHGE\WRWDODVVHWV&,5³WKH FRVWWRLQFRPHUDWLRLVXVHGDVDSUR[\IRURSHUDWLQJHIÀFLHQF\//5*/LVDPHDVXUHRIFUHGLWULVN FDOFXODWHGDVWKHUDWLRRIWRWDOORDQORVVSURYLVLRQVE\*URVVORDQ/2*7$LVDSUR[\PHDVXUHRI VL]HFDOFXODWHGDVDQDWXUDOORJDULWKPRIWRWDOEDQNDVVHWV32/PHDVXUHVWKHSROLWLFDOVWDELOLW\,) LQGLFDWHV WKH ,QYHVWPHQW IUHHGRP DQG 35 UHIHUV WKH 3URSHUW\ ULJKWV 9DOXHV LQ SDUHQWKHVLV DUH W VWDWLVWLFVDQGLQGLFDWHVLJQLÀFDQFHDWDQGOHYHOUHVSHFWLYHO\ M.A.F. Chowdhury et al. 1 0 .2 .4 .6 Quantile .8 1 0 .2 .4 .6 Quantile .8 1 0 .2 .4 .6 Quantile .8 1 0 .2 .4 .6 Quantile .8 1 0 .2 .4 .6 Quantile .8 1 0 .2 .4 .6 Quantile .8 1 0 .2 .4 .6 Quantile .8 1 COR -6.00 -4.00 -2.00 0.00 2.00 4.00 POLS -4.00-2.000.00 2.00 .8 LLRGL -0.10 0.00 0.10 0.20 LTA -2.00 -1.00 0.001.002.003.00 .4 .6 Quantile IF -0.30-0.20 -0.100.000.10 Intercept CIR .2 -0.06-0.04-0.020.00 0 -0.20 0.00 0.20 0.40 PR -40.00 -20.00 0.0020.00 40.00 GRHVQRWDOORZWKHLPSDFWRIWKH//5*/RQEDQNSURÀWDELOLW\WRGLIIHUIRUPRUHOHVV SURÀWDEOHEDQNV%\FRQWUDVWWKHTXDQWLOHYDU\LQJHVWLPDWHVRIWKH//5*/YDULDEOH GHULYHGE\WKH45PRGHODVVKRZQLQ7DEOHUHYHDOFRQVLGHUDEOHYDULDWLRQLQ VL]HVLJQLÀFDQFHDQGHYHQLQVLJQ,QSDUWLFXODUE\XVLQJWKHOHYHORIVLJQLÀFDQFHDVDFULWHULRQZKLOHWKH//5*/YDULDEOHLVDVVRFLDWHGZLWKDQLQVLJQLÀFDQW FRHIÀFLHQWDWWKHFHQWUDOTXDQWLOHVIURPSHUFHQWLOHLWEHFRPHVDVLJQLÀFDQWO\ SRVLWLYH QHJDWLYH FRHIÀFLHQW DW KLJKHU ORZHU TXDQWLOH OHYHOV IURP WR ² 2QWKHRWKHUKDQGWKHEDQNVL]H/7$YDU\LQJDWGLIIHUHQWSHUFHQWLOHDVVKRZQ LQ7DEOHUHYHDOVFRQVLGHUDEOHYDULDWLRQLQVL]HVLJQLÀFDQFHDQGHYHQLQVLJQ ,QSDUWLFXODUE\XVLQJOHYHORIVLJQLÀFDQFHDVDFULWHUDWLRQLWKDVEHHQIRXQG that the co-efficient of LTA is statistically significant only at 25 percentile whereas 2/6IRXQGWKDW/7$KDVDSRVLWLYHLPSDFWRQWKHSHUIRUPDQFHRIWKH,VODPLFEDQNV DWOHYHORIVLJQLÀFDQFH 6XEVHTXHQWO\ )LJXUH GHSLFWV WKH 45 HVWLPDWHV DQG WKH 2/6 HVWLPDWHV $SSDUHQWO\DVPRYLQJXSWKHEDQNSURÀWDELOLW\TXDQWLOHVOHYHOVWKH45HVWLPDWHV YDULHVZLGHO\0RUHRYHUDFRPSDULVRQRIWKH45HVWLPDWHVZLWKWKHWUDGLWLRQDO2/6 HVWLPDWHV LQGLFDWHV WKDW WKH 2/6 HVWLPDWHV XQGHUHVWLPDWH WKH SRVLWLYH ULVN²UHWXUQ UHODWLRQVKLS DW WKH KLJKHU TXDQWLOH OHYHOV DQG REWDLQ WKH ZURQJ FRQFOXVLRQ DW WKH lower quantiles. Figure SUHVHQWVWKHUHJUHVVLRQOLQHVGHULYHGE\WKH45DJDLQVW WKH2/6PHWKRGV+HUHLWFDQEHVHHQWKDWWKH//5*//7$DQG&,5YDULHVDWGLIferent percentile. Fig. 14.1 5HJUHVVLRQOLQHV45YV2/6IRUGLIIHUHQWYDULDEOHV 14 Socioeconomic Development and Its Effect on Performance of Islamic Banks… 7KLV ÀQGLQJ UHTXLUHV VRPH H[SODQDWLRQV ,Q WKHRU\ D EDQN WDNLQJ D UHODWLYHO\ KLJKULVNLVVXSSRVHGWRHDUQKLJKSURÀWVEXWLVDOVRH[SRVHGWRFHUWDLQFRVWVWKHUHIRUHLWVSURÀWDELOLW\PLJKWEHUHGXFHG,QSDUWLFXODUEDQNUXSWF\FRVWVPD\EHUHODWLYHO\KLJKIRUDEDQNPDLQWDLQLQJKLJKHUULVNH[SRVXUH$VXEVHTXHQWLQFUHDVHLQ ULVN WDNLQJ VKRXOG OHDG WR D GHFUHDVH LQ SURÀWDELOLW\ E\ KHLJKWHQLQJ LQVXUDQFH H[SHQVHV RQ XQLQVXUHG GHEW 2XU HPSLULFDO ÀQGLQJV VKRZ WKDW KLJKO\ SURÀWDEOH EDQNVFDQLQFUHDVHWKHLUSURÀWDELOLW\E\WDNLQJPRUHULVNVE\FRQWUDVWWKHVXSHULRU SROLF\LQOHVVSURÀWDEOHEDQNVLVWRGHFUHDVHUDWKHUWKDQLQFUHDVHWKHLUULVNH[SRVXUHV)RUEDQNVL]HLWFDQH[SODLQWKDWDFFRUGLQJWRGLVHFRQRPLHVRIVFDOHWKHVL]H RIDEDQNFRXOGEHQHJDWLYHUHODWHGWRWKHSHUIRUPDQFHGXHWRWKHPDUJLQDOFRVW 7KHUHIRUHWKHVL]HDQGWKHSHUIRUPDQFHRI,VODPLFEDQNVDUHQRWOLQHDUDWGLIIHUHQW percentile. From the socioeconomic perspectives, the results are consistent in most RIWKHYDULDEOHVH[FHSWSROLWLFDOVWDELOLW\DQGSURSHUW\ULJKWV7KHUHDVRQVIRUWKLV YDULDWLRQDWGLIIHUHQWVFDOHFRXOGEHGXHWRLWVVL]HDQGFXVWRPHULQYROYHPHQWVLQFH ZKHQWKHVL]HRIWKHEDQNDWDVPDOOVFDOHWKHHIIHFWRIWKHSURÀWDELOLW\PLJKWEHOHVV WKDQDODUJHVFDOHEDQN 14.5 Conclusion Islamic finance is in a unique position to offer an alternative to the present interestUDWHEDVHGGHEWÀQDQFLQJUHJLPHWKDWKDVEURXJKWLQGLYLGXDODQGJOREDOHFRQRPLHV to a series of crisis and lopsided prosperity. The core principle of Islamic finance is ULVNVKDULQJ5LVNVKDULQJLVWUXVWLQWHQVLYH7UXVWLVHQKDQFHGE\HIIHFWLYHLQVWLWXWLRQV(IIHFWLYHLQVWLWXWLRQVDUHDOVRNH\WRVXVWDLQHGDQGMXVWHFRQRPLFGHYHORSPHQW DQGJURZWK8QIRUWXQDWHO\WRGD\·V0XVOLPFRXQWULHVDUHLQVWLWXWLRQDOO\GHÀFLHQW +RZHYHUWKHFRUHSULQFLSOHVRI,VODPSURYLGHEHWWHUURDGPDSIRUUHIRUPVDQGLQVWLWXWLRQEXLOGLQJ ,QWKLVVWXG\LWKDVEHHQH[DPLQHGWKDWWKHOHYHORIHFRQRPLFIUHHGRPFRXOGPDWWHUVWURQJO\IRUEDQNLQJSHUIRUPDQFHDQGFUHGLWULVN7RLQYHVWLQSRWHQWLDOPDUNHW WKHLQGH[RIHFRQRPLFIUHHGRPFDQEHDSSOLHGWRVL]HXSDQHFRQRP\7KLVVWXG\ XVHGFRXQWULHVRYHU²WRVHHKRZEDQNVFRXOGSHUIRUPDORQJZLWKWKH LQGH[DVZHOODVDEUHDNGRZQRILWVLQGLYLGXDOFRPSRQHQWV2QWKHFRQWUDU\WKHUH ZHUH VRPH VNHWFK\ HYLGHQFHV WKDW VKRZHG WKDW HFRQRPLF IUHHGRP H[HUWV KXJH LPSDFWRQEDQNSHUIRUPDQFH,QDGGLWLRQEDQNVSHFLÀFGHWHUPLQDQWVDOVRH[KLELW PHDVXUDEOHHIIHFWVRQEDQNSHUIRUPDQFH In contrast, there is clear evidence that showed that less government intervenWLRQSURPRWHVEDQNSHUIRUPDQFHVWDELOLW\LQD0XVOLPFRXQWU\7KLVLQIHUHQFHLV VXSSRUWHGE\WKHUHVXOWVEDVHGRQDJJUHJDWHPHDVXUHPHQWRIVRFLRHFRQRPLFIUHHGRPDQGEDQNVSHFLÀFYDULDEOHV7KLVVWXG\IRXQGWKDWJUHDWHUHFRQRPLFIUHHGRP GHOLYHUVLQYHVWRUVZLWKEHWWHUPHDQYDULDQFHLQYHVWPHQWHIÀFLHQF\)URPWKHEDQN VSHFLÀFYDULDEOHVLWKDVEHHQIRXQGWKDWWKHUHODWLRQVKLSEHWZHHQULVNDQGUHWXUQ LV KHWHURJHQHRXV RU GLVVLPLODU DFURVV GLIIHUHQW TXDQWLOHV PHDQLQJ WKDW LI EDQN FRXOGWDNHPRUHULVNVWKHQKLJKO\SURÀWDEOHEDQNVFDQLQFUHDVHWKHLUSURÀWDELOLW\ M.A.F. 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References $GNLQV/&0RRPDZ5/6DYYLGHV$,QVWLWXWLRQVIUHHGRPDQGWHFKQLFDOHIÀFLHQF\6RXWK (FRQ-² $KPDG1+$KPDG61.H\IDFWRUVLQÁXHQFLQJFUHGLWULVNRI,VODPLFEDQND0DOD\VLDQ FDVH-0XDPDODW,VODP)LQDQF5HV² $O-DUUDK,0RO\QHX[3(IÀFLHQF\LQ$UDELDQEDQNLQJ3DSHUSUHVHQWHGDWWKH,QWHUQDWLRQDO &RQIHUHQFHRQ)LQDQFLDO'HYHORSPHQWLQ$UDE&RXQWULHV$EX'KDEL8$( $OWPDQ0+RZPXFKHFRQRPLFIUHHGRPLVQHFHVVDU\IRUHFRQRPLFJURZWK"7KHRU\DQG HYLGHQFH(FRQ%XOO² Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and DQDSSOLFDWLRQWRHPSOR\PHQWHTXDWLRQV5HY(FRQ6WXG² $UHOODQR 0 %RYHU 2 $QRWKHU ORRN DW WKH LQVWUXPHQWDO YDULDEOH HVWLPDWLRQ RI HUURU FRPSRQHQWVPRGHOV-(FRQ² $VPD , )DGOL $ 1RRU 7 'HWHUPLQDQWV RI ,VODPLF EDQNLQJ LQVWLWXWLRQ·V SURÀWDELOLW\ LQ 0DOD\VLD:RUG$SSO6FL-² $VXWD\0,]KDU+(VWLPDWLQJWKHSURÀWDELOLW\RI,VODPLFEDQNLQJHYLGHQFHIURP%DQN 0XDPDODW,QGRQHVLD5HY,VODP(FRQ² $WKDQDVRJORX33%ULVVLPLV61'HOLV0'%DQNVSHFLÀFLQGXVWU\VSHFLÀFDQGPDFURHFRQRPLFGHWHUPLQDQWVRIEDQNSURÀWDELOLW\-,QW)LQDQF0DUN,QVW0RQH\² %DVKLU $+0 'HWHUPLQDQWV RI SURÀWDELOLW\ LQ ,VODPLF EDQNV VRPH HYLGHQFH IURP WKH 0LGGOH(DVW,VODP(FRQ6WXG² %HQ1DFHXU6*RDLHG07KHGHWHUPLQDQWVRIFRPPHUFLDOEDQNLQWHUHVWPDUJLQDQGSURÀWDELOLW\HYLGHQFHIURP7XQLVLD)URQW)LQDQF(FRQ² %HUJHU$17KHUHODWLRQVKLSEHWZHHQFDSLWDODQGHDUQLQJVLQEDQNLQJ-0RQH\&UHGLW%DQN ² %OXQGHOO5%RQG6*00HVWLPDWLRQZLWKSHUVLVWHQWSDQHOGDWDDQDSSOLFDWLRQWRSURGXFWLRQIXQFWLRQV(FRQ5HY² %RQG65'\QDPLFSDQHOGDWDPRGHOVDJXLGHWRPLFURGDWDPHWKRGVDQGSUDFWLFH3RUW (FRQ-² &KHQ &5 +XDQJ <6 (FRQRPLF IUHHGRP HTXLW\ SHUIRUPDQFH DQG PDUNHW YRODWLOLW\ ,QW -$FFRXQW,QI0DQDJ² &KLQQ0',WR+&XUUHQWDFFRXQWEDODQFHVÀQDQFLDOGHYHORSPHQWDQGLQVWLWXWLRQVDVVD\LQJWKHZRUOG´VDYLQJJOXWµ-,QW0RQH\)LQDQF² &KRUWDUHDV*(*LUDUGRQH&9HQWRXUL$)LQDQFLDOIUHHGRPDQGEDQNHIÀFLHQF\HYLGHQFH IURPWKH(XURSHDQ8QLRQ-%DQN)LQDQF² El‐*DPDO0$,QDQRJOX+,QHIÀFLHQF\DQGKHWHURJHQHLW\LQ7XUNLVKEDQNLQJ² -$SSO(FRQ² )ULHV67DFL$&RVWHIÀFLHQF\RIEDQNVLQWUDQVLWLRQHYLGHQFHIURPEDQNVLQSRVW FRPPXQLVWFRXQWULHV-%DQN)LQDQF² *LDQQRQH'/HQ]D05HLFKOLQ/0DUNHWIUHHGRPDQGWKHJOREDOUHFHVVLRQ,0)(FRQ5HY ² *RGGDUG - 0RO\QHX[ 3 :LOVRQ -2 '\QDPLFV RI JURZWK DQG SURÀWDELOLW\ LQ EDQNLQJ -0RQH\&UHGLW%DQN² 14 Socioeconomic Development and Its Effect on Performance of Islamic Banks… +DQVHQ /3 /DUJH VDPSOH SURSHUWLHV RI JHQHUDOL]HG PHWKRG RI PRPHQWV HVWLPDWRUV (FRQRPHWULFD² +DURQ6'HWHUPLQDQWVRI,VODPLFEDQNSURÀWDELOLW\*ORE-)LQDQF(FRQ² +DVVDQ 0. %DVKLU $+0 'HWHUPLQDQWV RI ,VODPLF EDQNLQJ SURÀWDELOLW\ ,Q WK (5) DQQXDOFRQIHUHQFH0RURFFRSS² +HFNHOPDQ -& .QDFN 6 $LG HFRQRPLF IUHHGRP DQG JURZWK &RQWHPS (FRQ 3ROLF\ ² ,VODPLF)LQDQFLDO6HUYLFHV%RDUG$QQXDOUHSRUWKWWSZZZLIVERUJVHFSKS. 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