IMPACT OF CREDIT RISK AND CAPITAL ADEQUACY ON ISLAMIC AND CONVENTIONAL BANKING HEDGING

Abstract

This study aims to examine the relationship between credit risk and capital adequacy with the banking hedging of Islamic and conventional banks in Yemen. A sample of 4 conventional banks and 3 Islamic banks was used during (2012-2017). Using Pearson correlation and regression analysis, the study concludes that there is a statistically significant relationship between credit risk and banking hedging and a strong statistically significant relationship between capital adequacy and banking hedging. Based on the type of bank, results indicate a negative relationship but no statistical significance between conventional banks' credit risk and banking hedging. There is a statistically significant relationship between credit risk and banking hedging of Islamic banks. Capital adequacy positively interacts with the banking hedging in both banks.