The Effect Corruption on the Financial Health of Islamic Banks

Subject Areas : Financial Knowledge of Securities Analysis

Vahid Bekhradi Nasab ¹ , Fatemeh Zholanezhad ²

1 - department of accounting, Najaf Abad branch, Islamic Azad Univercity, Najaf Abad, Iran
2 - Department of Accounting, Science and Research Branch of Khuzestan, Islamic Azad University, Khuzestan, Ahvaz, Iran.

Received: 2017-06-24 Accepted : 2019-05-11 Published : 2020-09-22

Keywords: Islamic banking, Financial Health, Corruption, Dynamic panel data,

Abstract :

Islamic banking is developing rapidly around the world and is increasingly recognized as a viable alternative mode of financing especially these last years when capitalism has shown its limits and weaknesses. However, this astronomical growth of banking and Islamic finance was associated with a high level of corruption that plagues many Muslim countries. This ailment of corruption can deter Islamic banking to be a better effective and meaningful pathway for poverty reduction and economic development.The purpose of this paper is to investigate the impact of corruption on the soundness of Islamic banks. The purpose of this study is to assess the effect of corruption on the financial health of Islamic banks. The statistical population of this study is all banks accepted in Tehran Stock Exchange during the period from 2011 to 2016. Sample was selected based on the systematic elimination method and 23 banks were the basis for research hypothesis. The research method's research hypothesis and the fitting of the research model have been done using the EViews econometric software. There is a negative and significant relationship between financial corruption with the health of Islamic banks.Evidence of research suggests that, with the intensification of corruption at the country level, the financial health of banks has decreased and corruption has an adverse effect on the financial health of banks. In other words, financial corruption in the country threatens the financial health of banks.

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