Do profit-sharing investment account holders provide market discipline in an Islamic banking system?
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Market discipline is one of the main pillars of stability and resiliency in the banking system. The mechanism of market discipline primarily relies on the role of depositors who receive timely information and act accordingly through their respective accounts. In this study, we use generalized method of moments panel technique for 44 Islamic banks across different regions to research the presence of market discipline in the global Islamic banking system, focusing on the behaviour of the PSIA holders and their role in the governance of Islamic banks. These results have a significant policy implication in reviewing the framework governing the Islamic banks.
Market discipline , Islamic banks , PSIA (profit-sharing investment account) , Interactive dynamic mechanism
Alaeddin, Omar and Archer, Simon and Abdel Karim, Rifaat Ahmed and Mohd Rasid, Mohamed Eskandar Shah. (2017). Do profit-sharing investment account holders provide market discipline in an Islamic banking system? Journal of Financial Regulation, 3, pp. 210-232.
Oxford University Press