Comparative Analysis between Islamic Banking and Conventional Banking Firms in terms of Profitability, 2006-2009

Abstract

This paper work is going to perform comparative analysis of Islamic Banking and Conventional Banking firms. This study will also touch the differences of the Islamic Banks and Conventional Banks in terms of historical origin, mobilizing of financial resources, and ways of generating profit, operating principles, and equity structure. The main focus of this comparative study is to evaluate and measure the difference in financial performance of the two dissimilar banking firms operating in different countries. To evaluate empirically performance of the banks, different financial ratios are going to be employed which are based on CAMEL framework. We plan to measure performance in terms of capital adequacy, asset quality, management, earnings and liquidity. For this purpose, we will refer to the banking literature to find most commonly used ratios. In this work, t-test, f-test, and regression analysis will be used to make hypothesis test and determine the ratio significance. Consequently, results from empirical analysis indicate that there is difference in profitability determinants.