Activity diversification and performance of Islamic banks in Malaysia

Abstract : The current paper analyzes the performance and the choice of portfolio in Islamic banks. We consider a sample of 8 Malaysian universal Islamic banks between 2004 and 2008. We use the Herfindahl-Hirschman Index (HHI) as an indicator of the degree of diversification. The performance of the banks is measured by the return on assets ratio (ROA) and the Risk Adjusted Return On Capital ratio (RAROC). Finally, we use the Modern Portfolio Theory (MPT) of Markowitz to define the efficient frontier and the optimal portfolio.The results show that the corporate and investment activity increases significantly returns on assets. However, retail and commercial activity improves the results and performance of these banks. We find evidence that the level of diversification is not too high and recommend that they become concentrated on just one type of these activities. Finally, the MPT supports the idea that Islamic banks are not efficient.
Type de document :
Pré-publication, Document de travail
2017
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https://hal-upec-upem.archives-ouvertes.fr/hal-01527699
Contributeur : Sandrine Kablan <>
Soumis le : mercredi 24 mai 2017 - 21:42:21
Dernière modification le : mardi 10 octobre 2017 - 16:20:13

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  • HAL Id : hal-01527699, version 1

Citation

Sandrine Kablan, Ouidad Yousfi, Mohamed Ali Chatti. Activity diversification and performance of Islamic banks in Malaysia. 2017. 〈hal-01527699〉

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