Does Islamic banks' securitization involvement restrain their financing activity?

Does Islamic banks' securitization involvement restrain their financing activity? Purpose – The purpose of this paper is to validate the concern that banks' increasing involvement in securitization activity restrains banks' lending, as well as their degree of risk tolerance. Theoretical frameworks claim that securitization reduces risk, hence decreasing banks' degree of risk aversion. Subsequently, banks would be motivated to increase their percentage of assets devoted to risky activities, which is lending to economic sectors. However, banking statistics dictates that banks' lending is on the decline while banks' securitization activities are on the rise. Design/methodology/approach – The paper refers specifically to the Malaysian Islamic commercial banks and utilizes standard panel data analysis. Findings – Supportive evidence was found that banks' involvement in securitization activity do restrain their lending activity. In addition, banks tend to have a riskier portfolio composition following their involvement in securitization activity. Taken together, this signals that banks' involvement in securitization activity needs to be regulated or restricted since excessive securitization activities could curtail credit and increase risk inherent in banks' lending portfolio. Originality/value – This study departs from previous literature in the sense that an alternative method is introduced to measure banks' securitization activity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Humanomics Emerald Publishing

Does Islamic banks' securitization involvement restrain their financing activity?

Humanomics, Volume 24 (2): 15 – May 23, 2008

Loading next page...
 
/lp/emerald-publishing/does-islamic-banks-securitization-involvement-restrain-their-financing-qaHdvthk9F
Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0828-8666
DOI
10.1108/08288660810876813
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to validate the concern that banks' increasing involvement in securitization activity restrains banks' lending, as well as their degree of risk tolerance. Theoretical frameworks claim that securitization reduces risk, hence decreasing banks' degree of risk aversion. Subsequently, banks would be motivated to increase their percentage of assets devoted to risky activities, which is lending to economic sectors. However, banking statistics dictates that banks' lending is on the decline while banks' securitization activities are on the rise. Design/methodology/approach – The paper refers specifically to the Malaysian Islamic commercial banks and utilizes standard panel data analysis. Findings – Supportive evidence was found that banks' involvement in securitization activity do restrain their lending activity. In addition, banks tend to have a riskier portfolio composition following their involvement in securitization activity. Taken together, this signals that banks' involvement in securitization activity needs to be regulated or restricted since excessive securitization activities could curtail credit and increase risk inherent in banks' lending portfolio. Originality/value – This study departs from previous literature in the sense that an alternative method is introduced to measure banks' securitization activity.

Journal

HumanomicsEmerald Publishing

Published: May 23, 2008

Keywords: Islam; Securities; Banks; Loans; Investment appraisal; Malaysia

References

  • Does regulatory capital arbitrage or asymmetric information drives securitization?
    Ambrose, B.; Little, M.; Sanders, A.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off