First Faculty Advisor
Second Faculty Advisor
The purpose of this empirical study is to analyze the relationship between financial institutions and performance in times of external crisis and evaluate whether there is a difference in performance between bank models; Islamic (IBs) and conventional (CBs). Egypt surrounding the Arab Spring event (2009-2013) is taken as a case study, comparing 6 conventional banks and 3 Islamic banks. Financial ratio analysis is the main method employed, allowing performance to be measured by efficiency, capital adequacy, profitability, solvency, liquidity, and credit risk. Due to the small sample sizes, normality in the distribution cannot be assumed and so the nonparametric rank order Mann-Whitney U test was employed to assess the significance of the results of the ratio analysis as well as effect size analysis of the strength of association between the two samples performance. Results of the financial ratio analysis show overall, CBs have superior performance in all performance indicators examined other than with Cost-Income and NIM. With progression nearing and through the crisis event period, efficiency performance for both bank models were equally volatile and stable, while IBs were able to increase capital adequacy and solvency performance during the crisis. IBs profitability was significantly negatively impacted by the crisis, other than related to NIM, while CBs increased profitability rates. IBs liquidity performance worsened and then improved midway through the crisis while CBs stabilized liquidity rates. Lastly, IBs were able to improve credit risk performance midway through the crisis period while CBs declined midway. Results of the nonparametric tests hold these observed differences in results are insignificant and have weak effect size for all but the TENL ratio.