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The Social Sciences
Year: 2016  |  Volume: 11  |  Issue: 23  |  Page No.: 5703 - 5709

Examining the Influence of Capital Adequacy and Islamic Ratios on Islamic Bank Performance: Insights from Developing Countries

Sulaiman Abdullah Saif Alnasser Mohammed and Ebrahim Mohammed Al-matari    

Abstract: It has been argued that Islamic banks are more stable than Western banks in general and more particularly during the periods of financial crisis. To examine this assumption, this study examined the influence of capital adequacy ratio along with two Islamic ratios (Zakat and Profit and loss sharing) on the performance of Islamic banks in developing countries. By performing generalize least square method on a pooled panel data from 2007-2010, we found that capital adequacy is related to Islamic bank performance when the legal origin, financial crisis, economic status and measurement issues of Islamic bank performance are considered. The contradictory coefficient signs in the results expand the understanding on the issues of measurement and proper capital adequacy ratio in proper profitability result. The study implications have also been provided.

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