A comparison of leverage and profitability between Islamic and conventional banks
Résumé
The aim of our research is to determine whether Islamic and conventional banks are distinguishable from one another on the basis of financial characteristics, in particular, we consider leverage and profitability ratios. Our sample is made of Islamic and conventional banks, resulting in a panel of 545 observations (250 for Islamic banks) from 18 countries over the period 2004-2008. We run binary logistic regressions and discriminant analysis on leverage and profitability ratios and their related determinants. Globally, Islamic banks are observed to rely more heavily on their equity in financing assets than conventional banks. This difference in capital structure can be explained by the difference in size and dividend policy. Furthermore, profitability ratios are not significant according to binary regression and are not good discriminators between Islamic and conventional banks.