Journal Article

Purpose This study aims to assess the impact of banking models on the relationship between corporate social performance (CSP) and corporate financial performance (CFP) in determining a viable model for sustainable banking. Design/Methodology/Approach The study uses a cross-country sample of 117 financial institutions across 36 countries over an 8-year observation period between 2013 and 2020. To address heterogeneity and endogeneity issues, the authors use the System Generalised Methods of Moments (GMM) estimation models. The study also constructs a novel CSP Index as the independent variable for the research. This CSP Index comprises six indicators reflecting dimensions of financial inclusion and intermediation, serving as proxies for sustainable banking. Findings The findings reveal that the distinct banking models have a significant impact and can alter the direction of the CSP-CFP relationship. Specifically, the conventional banking (CB) model exhibits a statistically significant negative association between CSP and CFP. Conversely, the Islamic banking (IB) model emerges as a promising avenue for sustainable finance, indicating that increased corporate social responsibility (CSR) activities within Islamic banks (IBs) lead to greater profitability. This difference arises from the inherent strengths of the IB system in conducting financial intermediation and inclusion activities. This contrasts with the CB model's reliance on debt-based instruments, which exacerbates risk and detrimentally impacts financial performance. The findings also show that the social banking (SB) model has a significant effect on the CSP-CFP relationship. Originality/Value The findings give new insights into the longstanding debate on the CSP-CFP relationship by examining the impact of banking models. Introducing a novel CSP Index, characterised by its objectivity and verifiability, addresses the prevalent issue of bias inherent in the CSP indices of previous studies.

This paper examines the effects of bank financing diversification and market concentration on bank stability in Malaysia. Our study is unique as it investigates these effects within a banking industry that has undergone major restructuring due to the introduction and rapid penetration of a new banking type, Islamic banking. Despite its recent history, Islamic banking, having benefited from strong government support, has grown to command more than a third of the market share. The extensive realignment caused by such industry disruption makes the study of such effects on banking stability highly relevant and interesting. The study investigates 24 conventional and 18 Islamic banks in Malaysia from 2003 to 2019. Our results reveal differences in the above dynamics between the two bank types. Increasing diversification up to a moderate level enhances the stability of conventional banks, but only in less-concentrated markets. Very high diversification levels, however, impair their stability. For Islamic banks, stability seems unresponsive to financing diversification. Furthermore, while market concentration negatively affects the stability of conventional banks, Islamic banks appear to benefit from market concentration. These findings withstand our robustness tests using alternative measures of the key variables. Further examination suggests that these dynamics may have a temporal dimension. Our findings imply that a policy based on a single regulatory framework emphasizing increased diversification and competition across the industry may not be appropriate for all banks. Conventional and Islamic banks may require different regulatory treatment.

We examine the impact of the liquidity creation of Full-fledged Islamic Banks (FIBs) and Hybrid Conventional Banks (HCBs) on real economic output for a sample of 10 countries over the 11-year period from 2012-2022. Using the Feasible Generalized Least Squares (FGLS) framework, we show that both FIBs and HCBs liquidity creation per capita impact real economic output positively. However, HCBs have a greater impact on real economic output than FIBs. These results are statistically and economically significant. We further examine the impact of the liquidity created by both banking systems during the COVID-19 pandemic. Interestingly, for both bank types, liquidity creation has a negative impact on real output during the COVID-19 pandemic. However, in terms of magnitude, the negative impact is more pronounced for the HCBs. We also observe a non-linear impact of liquidity creation on real output, where the non-linearity is more pronounced among the HCBs. As for policy, our results imply that governments should incentivize FIBs to expand their scope and engage more in greenfield financing to have greater impact on real economic output.

Purpose SRI Sukuk, with its outcome-based emphasis, aims to align the Islamic finance industry with its original ideals and address criticisms related to form over substance. In Malaysia, while the pioneering Sukuk Ihsan was a social sukuk, recent SRI Sukuk issuances have predominantly been green or sustainable sukuk. This paper aims to evaluate the Malaysian SRI Sukuk market, identifying factors favouring green sukuk. It also examines whether structural issues in Sukuk Ihsan deterred subsequent issuers from social sukuk. The emergence of SRI Sukuk responds to sustainable development goals and the shift towards a low-carbon economy. Sukuk Ihsan, as the first Shariah-compliant pay-for-success structure, poses complexity and risk management challenges to meet performance criteria. Design/methodology/approach The study used a qualitative method in the form of a critical review of literature, interview sessions with experts and stakeholders who are familiar with SRI Sukuk and Sukuk Ihsan and a case study analysis of Sukuk Ihsan. Findings The popularity of green sukuk reflects the growing global environmental consciousness. The main factors driving the popularity of green sukuk are the maturity of the market and the existence of a strong supporting infrastructure for green issuances while the positive profiling benefits and availability of incentives for green issuances also contribute to a lesser extent. The recommendations include the promotion of social sukuk by regulators through a focus on establishing a similar supporting infrastructure for social sukuk as there are for SRI and standard Sukuk. In addition, issuers of social sukuk may want to reconsider the inclusion of key performance indicators (KPI) into the structure of future social sukuk issuances. Research limitations/implications Although all respondents considered Sukuk Ihsan to be a success, some potential areas of improvement were also noted. These include the structuring of future social sukuk issuances with a bigger discount to compensate for the additional risk being assumed by the investor; the need to be more careful in the KPI selection process; and one respondent even went so far as to suggest the possibility of totally removing the step-down feature of Sukuk Ihsan. Practical implications Industry implications of Sukuk Ihsan study include findings that require balancing disclosure and economics by providing additional disclosure requirements for SRI Sukuk that may pose risks without corresponding benefits for issuers. KPI selection and investor confidence should also be properly identified, as KPIs are essential for the pay-for-success model to work successfully. For sukuk holders, findings indicate that any approval for waivers during issuance can impact investor confidence negatively. Investor literacy and impact understanding should also be improved for social Sukuk success. Investors should understand the different risk exposures and evolving impact requirements vital for sustainable growth. Social implications The findings provide significant implications for social impact Sukuk issuance. They include providing a substantial case study for future social impact issuances, based on the pioneering impact of Sukuk Ihsan. Furthermore, Sukuk Ihsan's unqualified success validates the feasibility of socially responsible sukuk. Despite its early introduction, both tranches being fully subscribed reflects robust investor interest. Stakeholders were also proud of their involvement in such an initiative, viewing it as a significant achievement in creating societal impact. Originality/value Although there have been several prior studies done on Sukuk Ihsan, the focus of those studies was on its structure and the novelty of its step down returns structure where investors would receive lower returns if certain key performance indicators (KPIs) are met by Yayasan AMIR in the execution of its Trust School Programme. Bearing in mind that the first Sukuk Ihsan has a June 2022 maturity date, and the results of its KPIs were announced in December 2021, to the best of the authors' knowledge, this is the only documented case study that comprehensively reviews Sukuk Ihsan and identifies lessons learned and/or opportunities for improvement for the benefit of potential SRI Sukuk issuers in the future.

Purpose This study aims to examine the impact of liquidity creation per capita of tri-banking system and dual banking system on real economic output. Design/methodology/approach This study applies the feasible generalized least square framework on the data set of 12 countries, 8 with tri-banking system and 4 with dual banking system over the 2013-2022 period. Findings The findings show that for countries with tri-banking system, only liquidity creation by full-fledged Islamic Banks (FIBs) and hybrid conventional banks (HCBs) spurs real output, with the impact of HCBs being greater than that of FIBs. Nonetheless, for countries with dual banking system, both FIBs' and pure CBs' (PCBs) liquidity creation fosters real output. However, the impact of PCBs is slightly greater. Finally, Granger causality results confirm only the positive impact of the tri-banking system's liquidity creation on real output. Practical implications For countries with tri-banking system, only HCBs' and FIBs' liquidity creation spurs real output. However, for countries with dual banking system, liquidity created by both FIBs and PCBs fosters real output. However, only liquidity created by tri-banking system has a unidirectional Granger causality with real output. Originality/value To the best of the authors' knowledge, this is the first study that examines the impact of the banking subsystem liquidity creation on real economic output. Examining the impact of the liquidity created by this banking subsystem on the real economy is important for both regulators and policymakers.

Social media influencers (SMIs) have emerged as pivotal figures in advertising and critiquing products and services. They serve as credible sources, disseminating persuasive messages that significantly influence consumer purchasing behavior, particularly among Millennials. This paper investigates the factors pertaining to SMIs that shape the purchasing behavior of Muslim Millennials in Malaysia towards halal food products. Employing a non-probability sampling method, the study surveyed 403 respondents using Structural Equation Modelling-Partial Least Square (SEM-PLS). Data collection utilised a structured closed-ended questionnaire as the survey instrument. Results indicate that SMIs' expertise impacts consumers' attitudes and behaviors towards halal food products, with expertise serving as the sole mediator. Furthermore, SMIs wield significant influence over consumer purchasing behaviour by disseminating product reviews and advertisements to a broad audience. Factors such as trustworthiness, attractiveness, and expertise among these influencers directly impact the purchasing decisions of millennials. This study makes a significant contribution by enhancing comprehension of the latest digital and social media technologies' relevance and importance.