2024/02/26 by SAKOUILI, Abderrahmane, CHROQUI, Razane
#Counterparty risk #Islamic Banks #Liquidity risk #Market risk #Operational risk #Performance
paper · doi:10.48394/imist.prsm/rafi-v8i1.43739
This study aims to empirically investigate the effect liquidity risk, counterparty risk, operational risk and market risk have on the performance of Islamic banks (IBs) and determine which of these risks has the stronger impact. The study adopts a hypothetico-deductive approach by surveying numerous writings and previous studies on the subject, with the objective of developing the hypotheses and extracting the dependent and independent variables. The study through a panel data analysis measures the relationship between the variables and estimate two models using data on IBs from 13 countries over the period 2014-2020. Empirical evidence show that counterparty risk and operational risk have a negative association with the performance of IBs as measured by ROA and ROE. Liquidity risk affects positively the performance of IBs with its both measures and the same goes for market risk only when performance is measured by ROE. The study’s findings indicate that in comparison between the four risks, counterparty risk and market risk have the strongest association (effect) with IBs’ performance.