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The Effect of Market Power on Stability and Financial Performance of Islamic and Conventional Banks in Pakistan
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Author(s): Muhammad Ayub Awan (International Islamic University, Islamabad, Pakistan), Abdul Rashid (International Islamic University, Islamabad, Pakistan), Muhammad Ali Chohan (Guangdong CAS Cogniser Information Technology Co., Ltd., China), Shamaila Butt (Sohar University, Oman)and Ain Naadia Binti Mazlan (University of Technology Malaysia, Malaysia)
Copyright: 2025
Pages: 54
Source title:
Algorithmic Training, Future Markets, and Big Data for Finance Digitalization
Source Author(s)/Editor(s): Hamad Raza (Lyallpur Business School, Government College University, Faisalabad, Pakistan
), Ahsan Riaz (Lyallpur Business School, Government College University, Faisalabad, Pakistan
), Nimra Riaz (Department of Management Science, Riphah International University, Faisalabad, Pakistan
)and Suresh Ramakrishnan (Faculty of Management, Universiti Teknologi Malaysia, Malaysia)
DOI: 10.4018/979-8-3693-6386-7.ch013
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Abstract
The aim of the study is to explore the impact of market power on the financial stability and financial performance of Islamic banks and their counterparts. In our study the five conventional and five Islamic banks are selected from Pakistan for the period of 2007 to 2016 using Panel data. We have used different techniques to analyze the effect of market power on stability and financial performance. The findings reveal that efficiency of Islamic bank does not depend on the stability. Market share is statistically significant for both Islamic and their counterparts, therefore greater market share leads to increase the financial stability. The asset growth is statistically insignificant in case of both Islamic and their counterparts, therefore asset growth does not have any impact on financial stability. The interest rate spread is statistically significant with conventional banks. The policy makers of the conventional banking sector should work on a tradeoff among the financial performance and financial stability.
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