Jasim Al-Ajmi

Clients of conventional and Islamic banks in Bahrain: How they choose which bank to patronize

Purpose - The purpose of this paper is to report a study into: the motives that dispose customers in Bahrain to choose a specific bank; the level of familiarity of customers with the most widely used services/products offered by Islamic banks; and the extent of use of those products. Design/methodology/approach - This is the first study conducted in Bahrain to include three types of bank clients: those who bank with conventional banks, those who bank with Islamic banks, and who use both kinds of banks. The results are based on a response rate of 65.5 percent from 1,000 questionnaires distributed. Descriptive statistics and non-parametric statistics (Mann-Whitney and Kruskal-Wallis tests) are reported, and factor analysis used to analyze the responses. Findings - It is found that: Islamic religious belief and social responsibility are the two most important factors that determine bank selection. Cost benefit is the third most important factor considered in bank selection; clients of conventional and Islamic banks share a number of motives, but they differ significantly on a few motives in relation to bank selection; and clients of Islamic banks are more familiar with the products/services that conform to the Practical implications - The most important practical implication is for banks, conventional and Islamic, when setting and implementing their marketing strategies, which should include an awareness campaign. The results also benefit banks operating in the countries of the Gulf Cooperation Council (GCC). This is because of the similarities of the countries in the GCC. Originality/value - This paper is the first attempt to identify the motives and criteria for bank selection in Bahrain among clients of conventional banks, Islamic banks, and clients who bank with both types of banks. The study goes on to determine the extent of familiarity of clients of banks in Bahrain with the products/services that comply with Islamic

Risk management practices of conventional and Islamic banks in Bahrain

Purpose – The purpose of this paper is to report empirical evidence regarding the risk management practices of banks operating in Bahrain.Design/methodology/approach – A sample of bankers was surveyed through a questionnaire and the results used to examine if the risk management practices are significantly associated with the type of bank (conventional or Islamic) and if those practices are positively affected by understanding risk, risk management, risk identification, risk assessment analysis, risk monitoring and credit risk analysis. Several statistical and econometric methods were used to the test the hypotheses.Findings – Banks in Bahrain are found to have a clear understanding of risk and risk management, and have efficient risk identification, risk assessment analysis, risk monitoring, credit risk analysis and risk management practices. In addition, credit, liquidity and operational risk are found to be the most important risks facing both conventional and Islamic banks. Furthermore, the risk manag...

Are Gulf stock markets efficient? Evidence from new multiple variance ratio tests

The purpose of this article is to test for the Random Walk Hypothesis (RWH) for seven stock markets in Gulf Cooperation Council (GCC) countries, and to determine the effect of the correction for thin trading. Three new multiple variance ratio tests are applied to both observed returns and returns corrected for thin trading. It is found overall that the RWH does not hold for the GCC stock markets at both daily and weekly frequencies. This evidence is particularly strong when daily returns are used, where the RWH is soundly rejected for both observed and corrected returns.

Corporate dividends decisions: evidence from Saudi Arabia

Purpose - The paper aims to test the stability of dividend policy, test the effect of cash flow on the companys dividend policy, identify the factors that determine a firms cash dividend payments, and examine the characteristics of dividend-paying and non-paying firms. Design/methodology/approach - The hypotheses are tested using unbalance panel data for a sample of 54 Saudi-listed firms during 1990-2006. Findings - Saudi firms pay out a lower proportion of their cash flows compared to the proportion of dividends of reported earnings. Firms have more flexible dividend policies since they are willing to cut or skip dividends when profit declines and pay no dividends when losses are reported. Lagged dividend payments, profitability, cash flows, and life cycle are determinants of dividend payments. Agency costs are not a critical driver of dividend policy of Saudi firms. Zakat is found to play a role in explaining firms dividend decisions. Originality/value - This paper is the first to study the determinants of dividend policy in a country where companies are required to pay Islamic zakat.

Decisions on capital structure in a Zakat environment with prohibition of riba

Purpose - The purpose of this paper is to assess and explain the leverage of Saudi companies (53 companies) during the period 2003-2007. Design/methodology/approach - This paper reviews two different classical capital structure theories, namely tradeoff theory and pecking order theory, to formulate testable propositions concerning the determinants of debt levels of Saudi companies. It develops a number of regression models (pooled OLS and panel techniques) to test the studys hypotheses. Findings - The results suggest that a firms capital structure is positively affected by profitability, size, growth opportunities, and institutional ownership. It is negatively impacted by tangibility, government ownership, family ownership, business risk, dividend payment, and liquidity. Practical implications - Cost of capital is one of the pillars of corporate competitive advantage. Knowing which factors have the potential to influence capital structure can be essential to minimizing the cost of capital. Originality/value - This is the first study of the determinants of capital structure in Saudi Arabia that considers dividend payment, ownership structure (as a proxy for agency problems), and risk. This work also contributes to the current debate regarding theories of competitive capital structure.