Fair value and banking contagion

Purpose This paper aims to explore empirically the impact of fair value accounting on banking contagion in a comparative context between Islamic banks and conventional banks. Design/methodology/approach The analysis of the impact of fair value changes on banking contagion is carried out through a pa...

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Bibliographic Details
Published inJournal of Islamic accounting and business research Vol. 7; no. 3; pp. 215 - 236
Main Authors Gharbi, Leila, Khamoussi, Halioui
Format Journal Article
LanguageEnglish
Published Emerald Group Publishing Limited 13.06.2016
Subjects
Islamic banks
Conventional banks
Banking contagion
Fair value accounting
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Summary:Purpose This paper aims to explore empirically the impact of fair value accounting on banking contagion in a comparative context between Islamic banks and conventional banks. Design/methodology/approach The analysis of the impact of fair value changes on banking contagion is carried out through a panel data model. This study covers 20 Islamic banks and 40 conventional banks operating in the Gulf Cooperation Council (GCC) countries during nine years from 2003 to 2011. Findings Empirical evidence shows that there is a significant change in dynamic volatility in GCC banking sector because of financial crisis 2008. However, results fail to confirm the hypothesis that fair value accounting is significantly associated with an increase of banking contagion for both Islamic and conventional banks operating in GCC countries. Originality/value The outcome of this study provides some insights for academicians, accountants as well as regulators in terms of enhancing the effectiveness of accounting practices.
ISSN:1759-0817
1759-0825
DOI:10.1108/JIABR-12-2014-0042