Skip to main content

Research Repository

Advanced Search

Integrated early warning prediction model for Islamic banks: the Malaysian case

Othman, J.; Asutay, M.

Integrated early warning prediction model for Islamic banks: the Malaysian case Thumbnail


Authors

J. Othman



Abstract

It is increasingly becoming important to predict the performance of Islamic banks in order to anticipate a problem before it materializes and negatively affects banks’ performance and financial standing. Benefiting from the earlier research on the subject, this study aims to develop a preliminary integrated early warning model for Islamic banks in Malaysia to assess their financial standing by using quarterly data for the 2005–2010 period. Factor analysis and three parametric models (discriminant analysis, logit analysis, and probit analysis) are used in this study. Out of 29 variables used in the early stage of study, only 13 were selected as predictor variables in this study. Results show that, overall, classification accuracy is relatively high in the first few quarters before the benchmark quarter (2010 Q3) for all the estimated models. Correct classification rates are high during the first few quarters and decrease subsequently. Based on these results, therefore, it is obvious that the first few quarters before the benchmark quarter are the most important for making a correct prediction. These results show the predictive ability of the integrated model to differentiate healthy and non-healthy Islamic banks, thus reducing the expected cost of bank failure.

Citation

Othman, J., & Asutay, M. (2018). Integrated early warning prediction model for Islamic banks: the Malaysian case. Journal of Banking Regulation, 19(2), 118-130. https://doi.org/10.1057/s41261-017-0040-5

Journal Article Type Article
Online Publication Date Apr 21, 2017
Publication Date Apr 1, 2018
Deposit Date May 30, 2017
Publicly Available Date Apr 21, 2018
Journal Journal of Banking Regulation
Print ISSN 1745-6452
Electronic ISSN 1750-2071
Publisher Palgrave Macmillan
Peer Reviewed Peer Reviewed
Volume 19
Issue 2
Pages 118-130
DOI https://doi.org/10.1057/s41261-017-0040-5
Public URL https://durham-repository.worktribe.com/output/1356346

Files

Accepted Journal Article (390 Kb)
PDF

Copyright Statement
This is a post-peer-review pre-copyedit version of an article published in Journal of Banking Regulation. The definitive publisher-authenticated version Othman, J. and Asutay, M. (2017) 'Integrated early warning prediction model for Islamic banks : the Malaysian case.', Journal of banking regulation is available online at: https://doi.org/10.1057/s41261-017-0040-5





You might also like



Downloadable Citations