The effect of financial risks on the performance of Islamic and commercial banks in UAE
Risk management has emerged as a critical element across several economic sectors, with particular significance in the banking industry. The governing bodies of these industries encounter a multitude of threats stemming from the escalation of an unpredictable economic environment, the intricacy of t...
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| Format: | Article |
| Language: | English |
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Frontiers Media S.A.
2024-01-01
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| Series: | Frontiers in Applied Mathematics and Statistics |
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| Online Access: | https://www.frontiersin.org/articles/10.3389/fams.2023.1250227/full |
| _version_ | 1797367519167643648 |
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| author | Mohammad Salem Oudat Basel J. A. Ali Sameh Abdelhay Haziem M. Hazaimeh Mohamed Saif Rashid Altalay Attiea Marie Magdi El-Bannany |
| author_facet | Mohammad Salem Oudat Basel J. A. Ali Sameh Abdelhay Haziem M. Hazaimeh Mohamed Saif Rashid Altalay Attiea Marie Magdi El-Bannany |
| author_sort | Mohammad Salem Oudat |
| collection | DOAJ |
| description | Risk management has emerged as a critical element across several economic sectors, with particular significance in the banking industry. The governing bodies of these industries encounter a multitude of threats stemming from the escalation of an unpredictable economic environment, the intricacy of transactions and big data, and several other concealed factors. The primary aim of the present research is to investigate the impact of certain financial risks, including capital risk, liquidity risk, and operational risk, on the financial performance of both commercial and Islamic banks operating within the banking sector of the United Arab Emirates. The study will focus on the time frame spanning from 2015 to 2022. The data used in this study was sourced from the annual reports of banks, which were acquired from the official websites of the Abu Dhabi Securities Exchange and the Dubai stock market. The most prevalent indicators used to assess a bank's financial performance are Return on Assets (ROA) and Return on Equity (ROE). In contrast, the financial risk metrics included three distinct categories of risk: capital risk, liquidity risk, and operational risk. The findings indicate that there is a statistically significant positive relationship between capital risk and both return on assets (ROA) and return on equity (ROE). However, it was observed that neither liquidity risk nor operational risk had a statistically significant impact on either of the financial performance metrics. Moreover, the size of a bank has a notable and favorable impact on both return on assets (ROA) and return on equity (ROE). The ramifications of the study's conclusions have significant importance for regulators, bank management, and investors. IPolicymakers need to prioritize the enhancement of the regulatory framework pertaining to caboutements in order to the financial stability of banks. Bank managers should give priority to the management of capital risk and the size of the bank in order to their financial performance. In order to optimize profits, it is important for investors to carefully evaluate and take into account the many risk considerations associated with their investment selections.JEL:G20, G21 |
| first_indexed | 2024-03-08T17:19:29Z |
| format | Article |
| id | doaj.art-12f29f5dfbe94e3c8a254c3111cc4a0c |
| institution | Directory Open Access Journal |
| issn | 2297-4687 |
| language | English |
| last_indexed | 2024-03-08T17:19:29Z |
| publishDate | 2024-01-01 |
| publisher | Frontiers Media S.A. |
| record_format | Article |
| series | Frontiers in Applied Mathematics and Statistics |
| spelling | doaj.art-12f29f5dfbe94e3c8a254c3111cc4a0c2024-01-03T08:15:13ZengFrontiers Media S.A.Frontiers in Applied Mathematics and Statistics2297-46872024-01-01910.3389/fams.2023.12502271250227The effect of financial risks on the performance of Islamic and commercial banks in UAEMohammad Salem Oudat0Basel J. A. Ali1Sameh Abdelhay2Haziem M. Hazaimeh3Mohamed Saif Rashid Altalay4Attiea Marie5Magdi El-Bannany6College of Business Administration, Umm Al Quwain University, Umm Al Quwain, United Arab EmiratesCollege of Economics and Management (CoEM), Al Qasimia University, Sharjah, United Arab EmiratesCollege of Business Administration, Umm Al Quwain University, Umm Al Quwain, United Arab EmiratesCollege of Business Administration, Umm Al Quwain University, Umm Al Quwain, United Arab EmiratesFinancial Audit Department Umm Al Quwain, Umm Al Quwain, United Arab EmiratesCollege of Business Administration, Umm Al Quwain University, Umm Al Quwain, United Arab EmiratesCollege of Business Administration, Umm Al Quwain University, Umm Al Quwain, United Arab EmiratesRisk management has emerged as a critical element across several economic sectors, with particular significance in the banking industry. The governing bodies of these industries encounter a multitude of threats stemming from the escalation of an unpredictable economic environment, the intricacy of transactions and big data, and several other concealed factors. The primary aim of the present research is to investigate the impact of certain financial risks, including capital risk, liquidity risk, and operational risk, on the financial performance of both commercial and Islamic banks operating within the banking sector of the United Arab Emirates. The study will focus on the time frame spanning from 2015 to 2022. The data used in this study was sourced from the annual reports of banks, which were acquired from the official websites of the Abu Dhabi Securities Exchange and the Dubai stock market. The most prevalent indicators used to assess a bank's financial performance are Return on Assets (ROA) and Return on Equity (ROE). In contrast, the financial risk metrics included three distinct categories of risk: capital risk, liquidity risk, and operational risk. The findings indicate that there is a statistically significant positive relationship between capital risk and both return on assets (ROA) and return on equity (ROE). However, it was observed that neither liquidity risk nor operational risk had a statistically significant impact on either of the financial performance metrics. Moreover, the size of a bank has a notable and favorable impact on both return on assets (ROA) and return on equity (ROE). The ramifications of the study's conclusions have significant importance for regulators, bank management, and investors. IPolicymakers need to prioritize the enhancement of the regulatory framework pertaining to caboutements in order to the financial stability of banks. Bank managers should give priority to the management of capital risk and the size of the bank in order to their financial performance. In order to optimize profits, it is important for investors to carefully evaluate and take into account the many risk considerations associated with their investment selections.JEL:G20, G21https://www.frontiersin.org/articles/10.3389/fams.2023.1250227/fullcapital riskreturn on assets (ROA)return on equity (ROE)financial performanceIslamic banksconventional banks |
| spellingShingle | Mohammad Salem Oudat Basel J. A. Ali Sameh Abdelhay Haziem M. Hazaimeh Mohamed Saif Rashid Altalay Attiea Marie Magdi El-Bannany The effect of financial risks on the performance of Islamic and commercial banks in UAE Frontiers in Applied Mathematics and Statistics capital risk return on assets (ROA) return on equity (ROE) financial performance Islamic banks conventional banks |
| title | The effect of financial risks on the performance of Islamic and commercial banks in UAE |
| title_full | The effect of financial risks on the performance of Islamic and commercial banks in UAE |
| title_fullStr | The effect of financial risks on the performance of Islamic and commercial banks in UAE |
| title_full_unstemmed | The effect of financial risks on the performance of Islamic and commercial banks in UAE |
| title_short | The effect of financial risks on the performance of Islamic and commercial banks in UAE |
| title_sort | effect of financial risks on the performance of islamic and commercial banks in uae |
| topic | capital risk return on assets (ROA) return on equity (ROE) financial performance Islamic banks conventional banks |
| url | https://www.frontiersin.org/articles/10.3389/fams.2023.1250227/full |
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