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New Insights into Bank Asset Securitization: The Impact of Religiosity

Abdelsalam, Omneya; Elnahass, Marwa; Batten, Jonathan A.; Mollah, Sabur

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Authors

Marwa Elnahass

Jonathan A. Batten

Sabur Mollah



Abstract

We examine the influence of both organizational and geographical religiosity, as important ethical parameters moderating a bank’s decision to securitize their assets. The study employs a unique database of banks located within countries marked by high (low) religious adherence. Our results provide evidence that different measures of religiosity affect a bank’s decision to securitize their assets: Banks located in countries with high religious adherence are less likely to engage with securitization compared to banks in countries with lower religiosity, while Islamic banks have a higher likelihood of embarking on a highly monitored model of asset securitization in contrast to conventional banks. When examining the motives underlying a bank’s decision to securitize assets, there is strong evidence that Islamic banks securitize their assets to improve their portfolio diversification, financial performance, and regulatory compliance. This study highlights the importance of considering informal ethical mechanisms, such as religiosity, at both the country and firm levels, when studying bank risk-taking and trading decisions, especially in countries with dual banking systems.

Citation

Abdelsalam, O., Elnahass, M., Batten, J. A., & Mollah, S. (2021). New Insights into Bank Asset Securitization: The Impact of Religiosity. Journal of Financial Stability, 54, Article 100854. https://doi.org/10.1016/j.jfs.2021.100854

Journal Article Type Article
Acceptance Date Feb 18, 2021
Online Publication Date Feb 25, 2021
Publication Date 2021-06
Deposit Date Dec 15, 2020
Publicly Available Date Mar 29, 2024
Journal Journal of Financial Stability
Print ISSN 1572-3089
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 54
Article Number 100854
DOI https://doi.org/10.1016/j.jfs.2021.100854
Public URL https://durham-repository.worktribe.com/output/1255358

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