Equity-based financing and risk in Islamic banks: A cross-country analysis

Equity-based financing (EBF) is an Islamic bank (IB) type that promotes justice, spirituality, and values. However, data shows IBs still have low EBF. The researcher noted with EBF, there information asymmetry, agency problems the potential for moral hazards, meaning EBF may be a risky of transaction. This study aims to empirically show whether transaction by looking at role in non-performing (NPF), z-score, return on average assets (ROAA). research sample consisted 54 from 19 countries, observation period 11 years (2009 2019). finds has positive effect NPF does not affect z-score ROAA. subsample test riskier large than small IBs. negative one ROAA In contrast, examines robustness these findings employing other models as well generalised method moment (GMM) address any endogeneity problems.