Finance

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https://hdl.handle.net/20.500.11888/15847

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Browsing Finance by Author "Safaa Khalil Salah"

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    UNSYSTEMATIC RISK IMPACT ON BANKING STABILITY: ISLAMIC VS. CONVENTIONAL BANKS IN PALESTINE AND JORDAN
    (2023-03-16) Safaa Khalil Salah
    The main objective of this study is to verify the relationship between credit risk and liquidity risk on the stability of banks for a data set of 35 Conventional Banks (CB) and Islamic Banks (IB) belonging to Palestine and Jordan - with the following distribution (11) conventional banks and (3) Islamic banks in Palestine, and (17) conventional banks and (4) Islamic banks in Jordan was observed during 2008-2019,By performing a panel smooth threshold regression model, where this model was used because it takes into account the linear and non-linear relationships. The Z-score (ROA) was used as a dependent variable, non-performing loans from loans, and the ratio of liquid assets from assets, a proxy for credit risk, and liquidity risks, respectively, refer to transition variables, in addition to a set of control variables associated with the characteristics of bank and the macroeconomics. The results show that the relationship between the bank's stability and credit risk, and the bank's stability and liquidity risk is non-linear, and is characterized by the presence of two optimal thresholds equal to 11.41% for credit risk and 20.15% for liquidity risk. The results showed that credit risks do not affect the stability of banks, while liquidity risks negatively affect stability. With regard to the control variables that are bank-specific, the results show that both size and capital adequacy have a significant positive effect on stability, and after the threshold, it becomes negative in both equations. In terms of macroeconomic variables, it was found that political stability has a strong effect on the stability of banks. It was also found that the type of bank affects stability, as conventional banks are more stable than Islamic banks in Palestine and Jordan. Therefore, to ensure the stability of banks, the study recommends that banks choose the appropriate restructuring to ease their small size and enhance capital. Keywords: credit risk, liquidity risk, stability, PSTR model, Islamic bank, conventional bank.