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- Title
DETERMINANTS OF THE FINANCIAL STRATEGY OF ISLAMIC BANKS.
- Authors
Karim, Rifaat Ahmed Abdel; Ali, Amal El-Tigani
- Abstract
This article investigates the interaction between the environment and the financial strategy of Islamic banks to explain the changes in their capital structure focusing on two banks in the Middle East, namely Faisal Islamic Bank of Sudan and Kuwait Finance House, The study covers the period 1979-1985 which reflects the period since the inception of the two banks and up to their last available financial data. In their mobilization of funds, Islamic banks operate on a system based on profit and loss sharing in all their financial transactions. The L. G. Hrebiniak and W. F. Joyce (1985) model for interaction between environmental determinism and strategic choice offers a powerful explanation for the changes which took place during the period 1979-85 in the financial strategy of the two Islamic banks that were studied. The practice of the two organizations highlights how the capital structure of Islamic banks is dependent on the availability of strategic choice and the state of the environment. The above findings reflect the experience of only two Islamic banks and should therefore be treated with caution. However, although the size of the sample is very small, it is believed that the insight gained from the depth of information provided in the two case studies was worth the sacrifice. In addition, it is hoped that the above findings will evoke interest in this new phenomenon which we believe will contribute to the theory of both banking and finance.
- Subjects
MIDDLE East; ISLAMIC finance; STRATEGIC planning; CAPITAL structure; KUWAIT Finance House KSC; CORPORATE profits; PROFIT-sharing
- Publication
Journal of Business Finance & Accounting, 1989, Vol 16, Issue 2, p193
- ISSN
0306-686X
- Publication type
Article
- DOI
10.1111/j.1468-5957.1989.tb00013.x