Nonperforming loans in the GCC banking sectors: Does the Islamic finance matter?

Alandejani, M.; Asutay, M.

Abstract

This paper investigates the bank-level and country-level factors determining nonperforming loans (NPL) in the commercial banking industry of Gulf Cooperation Council (GCC) countries. Specifically; it examines the impact of the sectoral distribution financing growth and Islamic finance methods growth on NPL. To do so, we apply generalized method of moments (GMM) techniques, over the 2005–2011 period. Our findings indicate that the sectoral distribution of Islamic financing has an adverse impact on NPL, which suggest that the sectoral financing growth of Islamic banks increases the credit risk exposure more than conventional banks. The findings of the Islamic finance methods growth show that the impact of fixed-income debt contracts could increase NPL more than profit-and-loss-sharing contracts.

Citation

Alandejani, M., & Asutay, M. (2017). Nonperforming loans in the GCC banking sectors: Does the Islamic finance matter?. Research in International Business and Finance, 42, 832-854. https://doi.org/10.1016/j.ribaf.2017.07.020

• Journal Article Type: Article
• Acceptance Date: Jul 3, 2017
• Online Publication Date: Jul 12, 2017
• Publication Date: Dec 1, 2017
• Deposit Date: Aug 3, 2017
• Publicly Available Date: Jan 12, 2019
• Journal: Research in International Business and Finance
• Print ISSN: 0275-5319
• Electronic ISSN: 1878-3384
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 42
• Pages: 832-854
• DOI: https://doi.org/10.1016/j.ribaf.2017.07.020
• Public URL: https://durham-repository.worktribe.com/output/1350359