Legal rules, information transparency and Islamic bank capital decisions
To what extent does the formal institutional environment influence Islamic bank capital decisions? We answer this question by assessing the effect of the legal rule index on a sample of 100 Islamic banks in 28 countries from 1999 to 2013. Our econometric analyses show that legal rule index positivel...
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| Veröffentlicht in: | Applied economics 2021-11, Vol.53 (53), p.6184-6203 |
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| container_title | Applied economics |
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| creator | Bitar, Mohammad Benlemlih, Mohammed Erragragui, Elias Peillex, Jonathan |
| description | To what extent does the formal institutional environment influence Islamic bank capital decisions? We answer this question by assessing the effect of the legal rule index on a sample of 100 Islamic banks in 28 countries from 1999 to 2013. Our econometric analyses show that legal rule index positively and significantly influences capital ratios. The results can be explained by the idea that effective legal rules incentivize Islamic banks to hold higher capital ratios to signal better monitoring to depositors and regulators. In addition, we find that this positive association can be enhanced through strong information transparency channels, democratic and stable political institutions. These results provide insight into how a formal institutional environment can shape Islamic bank capital ratios. It further suggests that the formal institutional environment serves as a constraint on policymakers, as any given capital guideline may function very differently depending on the complexity of the formal institutional environment. |
| doi_str_mv | 10.1080/00036846.2021.1937497 |
| format | Article |
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We answer this question by assessing the effect of the legal rule index on a sample of 100 Islamic banks in 28 countries from 1999 to 2013. Our econometric analyses show that legal rule index positively and significantly influences capital ratios. The results can be explained by the idea that effective legal rules incentivize Islamic banks to hold higher capital ratios to signal better monitoring to depositors and regulators. In addition, we find that this positive association can be enhanced through strong information transparency channels, democratic and stable political institutions. These results provide insight into how a formal institutional environment can shape Islamic bank capital ratios. 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We answer this question by assessing the effect of the legal rule index on a sample of 100 Islamic banks in 28 countries from 1999 to 2013. Our econometric analyses show that legal rule index positively and significantly influences capital ratios. The results can be explained by the idea that effective legal rules incentivize Islamic banks to hold higher capital ratios to signal better monitoring to depositors and regulators. In addition, we find that this positive association can be enhanced through strong information transparency channels, democratic and stable political institutions. These results provide insight into how a formal institutional environment can shape Islamic bank capital ratios. 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| source | Worldwide Political Science Abstracts; Business Source Complete |
| subjects | Banking capital Economic analysis Economic theory Indexes Islam Islamic banks Islamic countries islamic finance Islamic financing journalist jailed legal rules Policy making Political institutions Quantitative Finance Transparency |
| title | Legal rules, information transparency and Islamic bank capital decisions |
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