Journal Article

We examine the impact of competition and portfolio diversification on banking stability for conventional and Islamic banks in Indonesia. We find that the Islamic banking sector is less stable, when compared to the conventional banking sector. Competition in the banking sector reduces stability, while diversification enhances it. We find that competition negatively impacts the Islamic banks, but diversification has no impact on these banks. An interesting finding is that competition and diversification complement each other in enhancing the stability of the Indonesian banking sector. These findings carry an important policy implication for the banking sector of Indonesia.

In this paper, we perform a non-linear assessment of Islamic rate - conventional rate relations for the case of Malaysia. Using monthly data covering the period January 1999 to November 2016, we find strong evidence supporting non-linear reactions of the Islamic investment rates to conventional rates in the long run and/or short-run for all matched maturities. More precisely, the Islamic investment rates exhibit faster upward movement (slower downward movement) in responses to conventional deposit rate increases (decreases). The asymmetric pricing behaviour of Islamic banks however tends to weaken as maturity lengthens. Accordingly, we infer that Islamic banks do not rigidly peg their investment deposit rates to conventional deposit rates as some have claimed in questioning the Islamicity of Islamic banks.

The purpose of this paper is to use Ferrell and Gresham (1985) contingency model to examine the impact of situational factors on decision-making behaviour related to ethical issues of Islamic banking practitioners. A total of 262 samples are collected from Islamic banking practitioners in the United Arab Emirates (UAE) and data analysis is conducted using structural equation modelling (SEM) with a confirmatory approach. The empirical findings indicate that decision-making behaviour related to ethical issues of Islamic banking practitioners is significantly influenced in the process of interacting with persons who are part of the organisation, and these influences are determined by the intra-organisational distance and legitimate authority between the individuals and the focal person. Further, it is also empirically verified that decision-making behaviour related to ethical issues of Islamic banking practitioners is significantly influenced by the presence and/or absence of the opportunity factors such as corporate policies, professional codes of ethics and rewards/punishment system that prevails in the organisation.

Intellectual capital is imperative for Islamic banks given their unique characteristics in that they offer innovative Shariah-based solutions to the modern financial problems. This study therefore examined the influence of corporate governance on intellectual capital disclosure (ICD) practices of Islamic banks. Data from a sample of 33 Islamic banks for the period 2012 to 2018 were collected. A self-developed ICD checklist was used to measure the extent of IC information disclosed in the annual report. This paper also examines the relationship between ICD practices and several corporate governance components which includes board size, board meeting, board independence, board gender, board expertise, audit committee size, audit committee meeting, audit committee independence, audit committee gender and audit committee expertise. Our results revealed that having an effective corporate governance structure is essential, as it is able to influence the ICD practices of Islamic banks. However, instead of focusing on the role of the board, our paper highlights the importance role of audit committee functions. Specifically, the results suggest that larger or reasonable audit committee size tends to have varied skills and expertise among the audit committee members, resulting in more information by allowing for greater diversity of backgrounds and viewpoints. Gender diversity in audit members' profiles will also encourage the board to be more effective and creative in generating innovative ideas, hence more IC will be created. This study adds to the empirical studies on corporate governance from Islamic banks' perspectives covering several countries. It also introduce the Shariah capital, as one of components in the IC index to respond to the peculiarities of Islamic on intellectual capital.

Even though large banks could imply large risks and heightened vulnerability for a country's macroeconomy, the presence of many small banks with similar behavior such as Islamic banks could also cause systemic risks. This article makes an initial attempt to investigate the impact of bank size on banking performance. Our study spans 12 emerging countries with dual banking systems and applies two-step dynamic system GMM estimator. The results show that size really does matter in the banking industry, and its impact on performance tends to be non-linear with a trade-off between profitability and efficiency. Comparing conventional with Islamic banks, we find that bank size has almost the same impact on the performance of both types of banks.