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Risk governance and financial stability : a comparative study of conventional and Islamic banks in the GCC.

Raouf, Hajar and Ahmed, Habib 'Risk governance and financial stability : a comparative study of conventional and Islamic banks in the GCC.', Global finance journal. .

Abstract

While the linkage between bank governance and financial stability has been discussed widely, empirical explorations of the strength of this relationship are scant. This paper examines the specific role of risk governance in promoting financial stability in banks. Using hand-collected data, it develops a Risk Governance Index (RGI) to measure the strength of risk governance structures and then examines its impact on four main indicators of financial stability for conventional and Islamic banks in the countries of Gulf Cooperation Council (GCC). The results from the dynamic panel models using two-step GMM method suggest that risk governance significantly contributes to the enhancement of the key financial stability measures. The RGI for Islamic banks is found to be smaller than their conventional counterparts and the regression results indicate that risk governance in Islamic banks has a negative impact on stability indicators. While the business models of Islamic banks have features that can enhance stability, poor risk governance can potentially negate this positive feature.

Item Type:Article
Full text:Publisher-imposed embargo
(AM) Accepted Manuscript
Available under License - Creative Commons Attribution Non-commercial No Derivatives 4.0.
File format - PDF
(602Kb)
Status:Peer-reviewed
Publisher Web site:https://doi.org/10.1016/j.gfj.2020.100599
Date accepted:05 December 2020
Date deposited:08 December 2020
Date of first online publication:No date available
Date first made open access:No date available

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