Ownership structure, deposits structure, income structure and insolvency risk in GCC Islamic banks
Journal of Islamic Accounting and Business Research
ISSN: 1759-0817
Article publication date: 11 April 2016
Abstract
Purpose
This paper aims to examine the effect of the concentration of ownership concentration and the deposits structure on the link between income structure and insolvency risk in Islamic banks operating in Gulf Cooperation Council (GCC) countries.
Design/methodology/approach
Using data for 43 GCC Islamic banks over the period from 2005 to 2012, this paper specifies a three-stage least-squares model in which the impact of the concentration of ownership concentration and the deposits structure on income diversification and insolvency risk is jointly analyzed to address the problem of endogeneity.
Findings
The findings show that the income structure influences the insolvency risk in Islamic banks with a concentrated ownership structure. This is because the deposits structure and large shareholders influence strategic decisions.
Research limitations/implications
This paper is, also, subject to a number of limitations. First, this study focuses exclusively on the GCC context and excludes the other Middle East and Far East countries. Second, the paper does not take into consideration banking regulation.
Practical implications
The paper findings shed light on the ongoing debate about the benefits of revenue diversification and also provide valuable insights for market participants, regulators and supervisors about what drives performance in Islamic banks.
Originality/value
The paper fills the gap in the existing literature on insolvency risk in Islamic banks. It is expected to provide useful information for policy makers and Islamic bankers to develop a sound Islamic banking industry in the GCC region. In addition, the link identified between ownership concentration, deposits structure and revenue diversification is a novel way of analyzing the impact of the latter on insolvency risk in Islamic banks.
Keywords
Citation
Grassa, R. (2016), "Ownership structure, deposits structure, income structure and insolvency risk in GCC Islamic banks", Journal of Islamic Accounting and Business Research, Vol. 7 No. 2, pp. 93-111. https://doi.org/10.1108/JIABR-11-2013-0041
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited