Islamic Investment Financing and Commercial Banks Facilities: Mediation Effect of the Islamic Bank Size
Keywords:Commercial Banking, Commercial Bank Facilities, Islamic Banking, Islamic Finance, Size
Purpose: The objective of this study was to investigate the effect of Islamic financing on commercial banks’ credit facilities tested under the mediation of the two variables of Islamic bank size (Total asset and Investment deposit).
Theoretical Framework: Even though studies of Islamic banking funding have been done within the Islamic economics and finance context, there has been needed to explore the effect of mediating the size of the Islamic bank and the relationship between Islamic financing and commercial banks’ credit facilities.
Design/Methodology/Approach: We used the methodologies of Baron and Kenny (1986) and Preacher and Hayes (2008) to test a mediation effect of the Islamic bank size variable. Regarding the testing and validity of the hypothetical research model, path analysis was used within the structural equation modeling analysis. The study sample consists of 16 commercial and Islamic banks in the Jordanian banking sector, it is comprehensive of all listed banks' data in the Amman stock exchange, to the possibility of fairly generalizing the results to the community.
Finding: Results indicate that the two variables of size indicators may partially mediate the direct effect of Islamic financing on commercial banks’ credit facilities. Such an effect is statistically significant. The findings provide practical solutions to enhancing competition in the Jordanian commercial and Islamic banking services market through various Islamic financing services to maintain and sustain banking resources.
Research, Practical & Social implications: Future studies can consider other indicators of Islamic bank size and assess their influence on the various dimensions of the relationship between Islamic funding methodology and commercial bank facilities
Implications/Originality/Value: This study contributes to the literature on Islamic banking by analyzing the results of the effect of Islamic investment financing formulas on the commercial credit market in Jordanian banking, and it offers a practical and applied perception of the role played of the Islamic banking methodology in the Jordanian commercial credit market.
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