Performance differences between Islamic and conventional banking forms

Abstract

This paper strives to recognize the possible performance differences between the two popular banking forms in the Gulf Cooperation Council (GCC) countries. Applying different methodologies on the data that span the period 2003-2015, this study documents significant differences with respect to the period, countries, and performance measures. Specifically, conventional banks in GCC countries outperform their Islamic counterparts in profitability. Also, bank specific factors such as liquidity, capital adequacy, bank size and growth all affect the profitability. In addition, GCC conventional and Islamic banks were isolated from the 2008 subprime crisis even though their profitability seems to be decayed differently over the period of the economic downturn.