The Stock Liquidity of Banks: A Comparison between Islamic and Conventional Banks in Emerging Economies |
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| Institution: | 1. American University of Sharjah, School of Business Administration, SBA2140, Sharjah 26666, United Arab Emirates;2. Chambers College of Business and Economics, West Virginia University, 1601 University Ave, Morgantown, WV 26506, United States of America;3. Darla Moore School of Business, University of South Carolina, 1014 Greene St., Columbia, SC 29208, United States of America;4. School of Finance, Nankai University, No. 38 Tongyan Road, Jinnan District, Tianjin, 300350 P.R. China;1. Ono Academic College, 104 Tzahal St., Kiryat Ono 55000, Israel;2. Ruppin Academic Center, Emek Hefer, Israel;1. Department of Production Engineering, São Carlos School of Engineering, University of São Paulo, 400 Trabalhador São-Carlense avenue, São Carlos, São Paulo 13566-590, Brazil;2. Universidad de Navarra, Spain;1. South Champagne Business School, France;2. Bank of Sharjah Chaired Professor, American University of Sharjah, United Arab Emirates;3. UAE University, United Arab Emirates;4. Monastir University, Tunisia;5. Institut de Recherche en Gestion (EA 2354), Université Paris Est, France;1. Economic Research Institute, The Bank of Korea, 39 Namdaemun-ro, Jung-gu, Seoul 04531, Republic of Korea;2. College of Economics, Sungkyunkwan University, 25-2, Sungkyunkwan-ro, Jongno-gu, Seoul 03063, Republic of Korea;1. Department of Accounting and Finance, Universiti Putra Malaysia, 43400 Serdang, Malaysia;2. Department of Economics, Universiti Putra Malaysia, 43400 Serdang, Malaysia;3. School of Economics and Management, Xiamen University, Malaysia |
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| Abstract: | We explore the stock liquidity of Islamic banks (IBs) and matching conventional banks (CBs) in emerging economies. We find that IBs have higher stock liquidity than CBs, suggesting that investors prefer IBs' stocks and neglect what they consider to be “sin stocks” (i.e., CBs' stocks), which do not conform to their religious beliefs. We also find that the liquidity effects are particularly important for small IBs, and during the global financial crisis. This evidence is stronger in countries with less developed banking sectors and weaker bank supervision and regulation. Hence, faith-driven investors tend to value more norm-conforming stocks (i.e., IBs) during times of distress and uncertainty, and in weaker regulatory environments. |
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