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We use a classic Merton credit risk framework to argue that Islamic Banking Institutions (IBIs) face less incentive to … take on risks than Conventional Banking Institutions (CBI). IBIs have less incentive for risk shifting both in and outside … analysis suggests that the loss absorption capacity of Islamic banks leads to less risk taking and a more stable banking system …
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We compare default rates on conventional and Islamic loans using a comprehensive monthly dataset from Pakistan that follows more than 150,000 loans over the period 2006:04 to 2008:12. We find robust evidence that the default rate on Islamic loans is less than half the default rate on...
Persistent link: https://www.econbiz.de/10013068775
We use a classic Merton credit risk framework to argue that Islamic Banking Institutions (IBIs) face less incentive to … take on risks than Conventional Banking Institutions (CBI). IBIs have less incentive for risk shifting both in and outside … analysis suggests that the loss absorption capacity of Islamic banks leads to less risk taking and a more stable banking system. …
Persistent link: https://www.econbiz.de/10010532124