Pub Date : 2025-10-01Epub Date: 2025-06-29DOI: 10.1016/j.bir.2025.06.011
Muhammad Umar
Education plays a vital role in development and adoption of new technologies, making financial education particularly important for the advancement and acceptance of financial innovations. This study explores the impact of financial literacy on the adoption of central bank digital currencies (CBDCs), using data from 72 countries spanning 2010 to 2023. Findings from ordered logistic, ordered probit, logistic, probit, and ordinary least squares consistently reveal that higher levels of financial literacy significantly increase the likelihood of CBDC adoption. Notably, incorporating financial education into primary, secondary, and university curricula has a strong, positive impact on adopting a CBDC. Conversely, countries that have yet to implement financial literacy in public school curricula, but intend to, are currently less likely to adopt CBDCs. These results suggest that for countries planning to launch a CBDC, investment in financial literacy is critical step toward encouraging adoption.
{"title":"The role of financial literacy in accelerating the adoption of a central bank digital currency","authors":"Muhammad Umar","doi":"10.1016/j.bir.2025.06.011","DOIUrl":"10.1016/j.bir.2025.06.011","url":null,"abstract":"<div><div>Education plays a vital role in development and adoption of new technologies, making financial education particularly important for the advancement and acceptance of financial innovations. This study explores the impact of financial literacy on the adoption of central bank digital currencies (CBDCs), using data from 72 countries spanning 2010 to 2023. Findings from ordered logistic, ordered probit, logistic, probit, and ordinary least squares consistently reveal that higher levels of financial literacy significantly increase the likelihood of CBDC adoption. Notably, incorporating financial education into primary, secondary, and university curricula has a strong, positive impact on adopting a CBDC. Conversely, countries that have yet to implement financial literacy in public school curricula, but intend to, are currently less likely to adopt CBDCs. These results suggest that for countries planning to launch a CBDC, investment in financial literacy is critical step toward encouraging adoption.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 ","pages":"Pages 1-9"},"PeriodicalIF":7.1,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145289605","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-01Epub Date: 2025-07-10DOI: 10.1016/j.bir.2025.07.004
Muhammad S. Tahir
Using a large and reliable dataset from the European Union, this study aims to find if financial literacy overconfidence and poor financial behaviour are associated with loan-taking propensity, along with investigating the mediation of financial fragility. By employing probit regression, the findings indicate that both financial literacy overconfidence and poor financial behaviour are positively associated with loan-taking propensity. Other results posit that financial fragility is a strong mediator as it completely mediates the first path and partially mediates the second path. The findings remain consistent after conducting endogeneity checks. The results substantiate the arguments of the dual process theory by showing how heuristic-driven thinking (Type I) forms an overconfidence bias, leading to financial fragility and sub-optimal borrowing decisions. Overall, the results add to the growing literature on overconfidence, financial vulnerability, and debt accumulation. Finally, a range of theoretical and practical implications are discussed along with proposing future research directions.
{"title":"Financial literacy overconfidence, poor financial behaviour, and loan-taking propensity: The mediating role of financial fragility","authors":"Muhammad S. Tahir","doi":"10.1016/j.bir.2025.07.004","DOIUrl":"10.1016/j.bir.2025.07.004","url":null,"abstract":"<div><div>Using a large and reliable dataset from the European Union, this study aims to find if financial literacy overconfidence and poor financial behaviour are associated with loan-taking propensity, along with investigating the mediation of financial fragility. By employing probit regression, the findings indicate that both financial literacy overconfidence and poor financial behaviour are positively associated with loan-taking propensity. Other results posit that financial fragility is a strong mediator as it completely mediates the first path and partially mediates the second path. The findings remain consistent after conducting endogeneity checks. The results substantiate the arguments of the dual process theory by showing how heuristic-driven thinking (Type I) forms an overconfidence bias, leading to financial fragility and sub-optimal borrowing decisions. Overall, the results add to the growing literature on overconfidence, financial vulnerability, and debt accumulation. Finally, a range of theoretical and practical implications are discussed along with proposing future research directions.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 ","pages":"Pages 10-17"},"PeriodicalIF":7.1,"publicationDate":"2025-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145289606","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-05-21DOI: 10.1016/j.bir.2025.05.011
Hassnian Ali , Ahmet Faruk Aysan
This study provides empirical evidence on the role of artificial intelligence (AI) and machine learning (ML) sentiment in influencing financial performance by Islamic banks. Using advanced textual analysis methods, including long short-term memory (LSTM) networks, AI and ML sentiment is derived from annual reports. The study employs fixed-effects regression using the return on equity (ROE) as the primary measure and robustness checks using random forest models and spline regressions to examine their impact on ROE and the return on assets (ROA). It also investigates the mediating role of the development of information communication technologies (ICT) and the moderating effect of growth in the gross domestic product (GDP). Our findings reveal that positive sentiment about AI and ML significantly enhances profitability, and combined sentiment has the strongest predictive power. The mediating role of ICT development highlights the importance of digital infrastructure, and GDP growth emphasizes the contextual dependence of AI-driven innovation.
{"title":"Decoding digital signals: AI sentiment and financial performance at İslamic banks","authors":"Hassnian Ali , Ahmet Faruk Aysan","doi":"10.1016/j.bir.2025.05.011","DOIUrl":"10.1016/j.bir.2025.05.011","url":null,"abstract":"<div><div>This study provides empirical evidence on the role of artificial intelligence (AI) and machine learning (ML) sentiment in influencing financial performance by Islamic banks. Using advanced textual analysis methods, including long short-term memory (LSTM) networks, AI and ML sentiment is derived from annual reports. The study employs fixed-effects regression using the return on equity (ROE) as the primary measure and robustness checks using random forest models and spline regressions to examine their impact on ROE and the return on assets (ROA). It also investigates the mediating role of the development of information communication technologies (ICT) and the moderating effect of growth in the gross domestic product (GDP). Our findings reveal that positive sentiment about AI and ML significantly enhances profitability, and combined sentiment has the strongest predictive power. The mediating role of ICT development highlights the importance of digital infrastructure, and GDP growth emphasizes the contextual dependence of AI-driven innovation.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 953-971"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144894949","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-06-06DOI: 10.1016/j.bir.2025.06.002
Burak Dogan
This study evaluates how the current Israel boycotts affect Borsa Istanbul. An event study in a 45-day window around October 7, 2023 tests abnormal returns for a value-weighted portfolio of 22 boycotted firms using four models (Market, Market-Return, Constant-Mean, CAPM). All detect a clear one-day price hit, though magnitudes vary. For longer horizons we re-create the BIST 30, BIST 100 and Participation 30 indices without the boycotted stocks and follow them to December 31, 2024. Sharpe, Sortino, Treynor and Jensen metrics drift modestly higher, and the revised indices edge ahead in cumulative return, but significance tests give mixed signals. Overall, boycott targets suffer a short-run valuation loss, while indices that exclude them record slightly better risk-adjusted performance over the next year.
{"title":"Examining the financial effects of boycotting Israel: Event-study and modern portfolio theory approaches with data from Borsa Istanbul","authors":"Burak Dogan","doi":"10.1016/j.bir.2025.06.002","DOIUrl":"10.1016/j.bir.2025.06.002","url":null,"abstract":"<div><div>This study evaluates how the current Israel boycotts affect Borsa Istanbul. An event study in a 45-day window around October 7, 2023 tests abnormal returns for a value-weighted portfolio of 22 boycotted firms using four models (Market, Market-Return, Constant-Mean, CAPM). All detect a clear one-day price hit, though magnitudes vary. For longer horizons we re-create the BIST 30, BIST 100 and Participation 30 indices without the boycotted stocks and follow them to December 31, 2024. Sharpe, Sortino, Treynor and Jensen metrics drift modestly higher, and the revised indices edge ahead in cumulative return, but significance tests give mixed signals. Overall, boycott targets suffer a short-run valuation loss, while indices that exclude them record slightly better risk-adjusted performance over the next year.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 1026-1037"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144895714","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines the performance of trading strategies based on beta, idiosyncratic volatility (IVOL), MAX (lottery behavior), skewness, and tail risk in five major Asian markets, using data from 1999 to 2021. The most important determinant of cross-sectional differences in strategy premiums is financial market development, followed by market sentiment and coskewness. The study highlights the time-varying performance of risk-based strategies. “Betting against risk” strategies, except for skewness, work only during downturns, whereas “betting for risk” strategies work during upturns. Hence, a disposition effect is observed over time; investors are risk seekers in downturns and risk-averse in upturns. With respect to skewness, investors prefer positively skewed stocks during downturns. However, the findings for the sample markets are mixed during upturns. The Fama-French five-factor model performs reasonably well, except for three trading strategies. Various behavioral biases explain the premiums on different risk-based strategies.
{"title":"Time-varying performance of betting against beta (BAB) and other risk-based anomalies: Evidence from Asia","authors":"Sarika Rakhyani , Sanjay Sehgal , Florent Deisting","doi":"10.1016/j.bir.2025.05.009","DOIUrl":"10.1016/j.bir.2025.05.009","url":null,"abstract":"<div><div>This study examines the performance of trading strategies based on beta, idiosyncratic volatility (IVOL), MAX (lottery behavior), skewness, and tail risk in five major Asian markets, using data from 1999 to 2021. The most important determinant of cross-sectional differences in strategy premiums is financial market development, followed by market sentiment and coskewness. The study highlights the time-varying performance of risk-based strategies. “Betting against risk” strategies, except for skewness, work only during downturns, whereas “betting for risk” strategies work during upturns. Hence, a disposition effect is observed over time; investors are risk seekers in downturns and risk-averse in upturns. With respect to skewness, investors prefer positively skewed stocks during downturns. However, the findings for the sample markets are mixed during upturns. The Fama-French five-factor model performs reasonably well, except for three trading strategies. Various behavioral biases explain the premiums on different risk-based strategies.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 908-929"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144894946","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-05-17DOI: 10.1016/j.bir.2025.05.010
Cengizhan Karaca , Walid Mensi , Eray Gemici
This study investigates the nonlinear relationship between capital structure and firm value using data from manufacturing firms listed on Borsa Istanbul over the period 2005 to 2023. We use a novel methodology, the Method of Moments Quantile Regression (MMQR), and perform several robustness checks using the novel JKS half-panel jackknife estimation method, and the lag augmented VAR (LA-VAR) panel causality test. Our results show the presence of an inverted U-shaped nonlinear relation between the capital structure and firm value. Specifically, higher borrowing increases firm value in the lower quantiles, while excessive borrowing beyond a threshold adversely decreases it. Causality test results indicate a unidirectional causality from capital structure to firm value. The results have implications for management in manufacturing industries and policymakers, and enhance our understanding of how firms should restrict their borrowing to optimize firm value, maintain financial stability, and foster sustainable growth.
{"title":"Inverted U-shaped dynamics of capital structure and firm value: Evidence from an emerging market","authors":"Cengizhan Karaca , Walid Mensi , Eray Gemici","doi":"10.1016/j.bir.2025.05.010","DOIUrl":"10.1016/j.bir.2025.05.010","url":null,"abstract":"<div><div>This study investigates the nonlinear relationship between capital structure and firm value using data from manufacturing firms listed on Borsa Istanbul over the period 2005 to 2023. We use a novel methodology, the Method of Moments Quantile Regression (MMQR), and perform several robustness checks using the novel JKS half-panel jackknife estimation method, and the lag augmented VAR (LA-VAR) panel causality test. Our results show the presence of an inverted U-shaped nonlinear relation between the capital structure and firm value. Specifically, higher borrowing increases firm value in the lower quantiles, while excessive borrowing beyond a threshold adversely decreases it. Causality test results indicate a unidirectional causality from capital structure to firm value. The results have implications for management in manufacturing industries and policymakers, and enhance our understanding of how firms should restrict their borrowing to optimize firm value, maintain financial stability, and foster sustainable growth.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 939-952"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144894948","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This research examines the role of the financial sector in advancing the Sustainable Development Goals (SDGs) by promoting access to financial services and leveraging Information and Communication Technologies (ICTs). Utilizing the k-means++ algorithm, we clustered 41 European countries based on the values of the Network Readiness Index (NRI) pillars—serving as a measure of ICT—and by the achieved values for SDG indicator 8.10, which reflects access to financial services. The results confirmed that cluster differences based on NRI components are significant, particularly with respect to: ownership of accounts with banks, other financial institutions, and mobile-money-service providers; sociodemographic characteristics of financial service users; and contributions to 13 out of the 17 SDGs. Notably, in terms of the impact of financial service access on SDG performance, significant differences between clusters were found in eight out of the 17 SDGs.
{"title":"Network readiness, financial inclusion, and sustainable development goals: Insights from a clustering approach","authors":"Mirjana Jemović , Ivana Marković , Adela Ljajić , Srđan Marinković","doi":"10.1016/j.bir.2025.05.013","DOIUrl":"10.1016/j.bir.2025.05.013","url":null,"abstract":"<div><div>This research examines the role of the financial sector in advancing the Sustainable Development Goals (SDGs) by promoting access to financial services and leveraging Information and Communication Technologies (ICTs). Utilizing the k-means++ algorithm, we clustered 41 European countries based on the values of the Network Readiness Index (NRI) pillars—serving as a measure of ICT—and by the achieved values for SDG indicator 8.10, which reflects access to financial services. The results confirmed that cluster differences based on NRI components are significant, particularly with respect to: ownership of accounts with banks, other financial institutions, and mobile-money-service providers; sociodemographic characteristics of financial service users; and contributions to 13 out of the 17 SDGs. Notably, in terms of the impact of financial service access on SDG performance, significant differences between clusters were found in eight out of the 17 SDGs.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 999-1011"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144895712","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-05-05DOI: 10.1016/j.bir.2025.05.003
M. Ünal Paçcı , Nesrin Okay
This study estimates the zero-coupon yield curves for Turkish government nominal bonds from February 2005 to June 2022 using the Nelson–Siegel–Svensson parametric model. We implement a weighting scheme in the objective function, where squared pricing errors are weighted by the inverse of the square root of the bond duration. This weighting scheme strikes a better balance between the short- and long-maturity bonds during the optimization process. Moreover, by employing four nonlinear optimization algorithms and three parameter initialization approaches, we aim to prevent premature convergence to local optima and improve the quality of fit. Our integrated methodology yields reasonably low in-sample root mean squared error values for price errors and offers clear guidance and a framework for researchers in constructing zero-coupon yield curves.
{"title":"Integrated methodology for estimating zero-coupon yield curves: Evidence from Turkish government nominal bonds","authors":"M. Ünal Paçcı , Nesrin Okay","doi":"10.1016/j.bir.2025.05.003","DOIUrl":"10.1016/j.bir.2025.05.003","url":null,"abstract":"<div><div>This study estimates the zero-coupon yield curves for Turkish government nominal bonds from February 2005 to June 2022 using the Nelson–Siegel–Svensson parametric model. We implement a weighting scheme in the objective function, where squared pricing errors are weighted by the inverse of the square root of the bond duration. This weighting scheme strikes a better balance between the short- and long-maturity bonds during the optimization process. Moreover, by employing four nonlinear optimization algorithms and three parameter initialization approaches, we aim to prevent premature convergence to local optima and improve the quality of fit. Our integrated methodology yields reasonably low in-sample root mean squared error values for price errors and offers clear guidance and a framework for researchers in constructing zero-coupon yield curves.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 841-851"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144895733","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The explosive growth of financial technology (Fintech) has transformed the credit and equity markets, providing small businesses with unprecedented access to capital and driving financial inclusion. However, how this financial inclusion affects the effectiveness of capital allocation remains unclear. Addressing this question, this study examines the impact of Fintech on capital allocation efficiency using data on Fintech firms from Jordan and Palestine between 2010 and 2020. Our central hypothesis is that while Fintech promotes financial inclusion, it may simultaneously lead to capital allocation inefficiencies. To measure the presence of Fintech, we use the number of Fintech firms in Jordan and Palestine. We find a striking pattern: the expansion of Fintech firms is associated reduce resource allocation to more efficient firms, suggesting systemic inefficiencies. Both the industry and corporate levels exhibit this trend. Mechanisms analysis reveals that this effect is driven by increased competition in the lending market and efficient stock swaps. Overall, we highlight how changes induced by Fintech in debt financing are the main cause of these inefficiencies. Our findings offer implications and insights for policymakers and Fintech companies by stressing the dual impacts of Fintech on financial markets in Jordan and Palestine. This underlines the necessity for a balanced approach to integrating Fintech innovations to ensure that the benefits of enhanced financial inclusion do not compromise financial efficiency and capital allocation. This study significantly contributes to the literature by delivering a comprehensive analysis of the intricate dynamics between Fintech, financial inclusion, and capital allocation efficiency in Jordan and Palestine.
{"title":"Impact of FinTech on capital allocation: Empirical evidence from Jordan and Palestine","authors":"Aladeen Hmoud , Fu'ad Magableh , Nemer Badwan , Mohammad Almashaqbeh","doi":"10.1016/j.bir.2025.06.004","DOIUrl":"10.1016/j.bir.2025.06.004","url":null,"abstract":"<div><div>The explosive growth of financial technology (Fintech) has transformed the credit and equity markets, providing small businesses with unprecedented access to capital and driving financial inclusion. However, how this financial inclusion affects the effectiveness of capital allocation remains unclear. Addressing this question, this study examines the impact of Fintech on capital allocation efficiency using data on Fintech firms from Jordan and Palestine between 2010 and 2020. Our central hypothesis is that while Fintech promotes financial inclusion, it may simultaneously lead to capital allocation inefficiencies. To measure the presence of Fintech, we use the number of Fintech firms in Jordan and Palestine. We find a striking pattern: the expansion of Fintech firms is associated reduce resource allocation to more efficient firms, suggesting systemic inefficiencies. Both the industry and corporate levels exhibit this trend. Mechanisms analysis reveals that this effect is driven by increased competition in the lending market and efficient stock swaps. Overall, we highlight how changes induced by Fintech in debt financing are the main cause of these inefficiencies. Our findings offer implications and insights for policymakers and Fintech companies by stressing the dual impacts of Fintech on financial markets in Jordan and Palestine. This underlines the necessity for a balanced approach to integrating Fintech innovations to ensure that the benefits of enhanced financial inclusion do not compromise financial efficiency and capital allocation. This study significantly contributes to the literature by delivering a comprehensive analysis of the intricate dynamics between Fintech, financial inclusion, and capital allocation efficiency in Jordan and Palestine.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 1068-1084"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144895730","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-05-26DOI: 10.1016/j.bir.2025.05.012
Remzi Gök , Shawkat Hammoudeh , Ahdi Noomen Ajmi , Mehmet Balcilar
This study examines return connectedness and spillover shock effects between Islamic profit-sharing rates (PSR) and conventional deposit rates (DPR) of banking sectors across various maturities in Türkiye and Malaysia. Overall, financing rates with various maturities in Türkiye act as transmitters of shocks in both banking sectors. Specifically, short-term rates serve as net spillover transmitters, while long-term rates of DPR and PSR emerge as primary transmitters and receivers, respectively. Total directional connectedness analysis reveals that the degree of integration between sectors fluctuates over time, with political instability and monetary policy actions being key drivers. Although conventional deposit rates dominate their Islamic counterparts in the early part of the study period, a significant policy rate hike in 2014 shifts this balance in favour of profit-sharing rates, suggesting that the conventional banking sector has become increasingly susceptible to shocks originating from the Islamic banking sector in recent years. Moreover, Türkiye's adoption of unconventional monetary policies has reduced integration within the banking system, thereby altering the dynamics of return spillovers, with deposit rates acting as main transmitters. We observe a relatively stable connectivity mechanism over time in Malaysia, where market risk becomes stronger as of 2020. Both short-term rates are net transmitters during most of the sample period, and medium- and longer-term tenors of the Islamic (conventional) banking sector function as net receivers (transmitters). DPR is shown to exert a substantial influence over PSR, with spillover shock effects being more pronounced for shorter tenors. While global factors strongly influence overall connectivity in Türkiye, local factors such as exchange rates, interest rates, and credit default swaps (CDS) play a critical role in net shock transmission. DPRs are shown to be dominant factors in predicting PSRs in Türkiye and both sectors exhibit stronger interactions at higher intervals of time.
{"title":"Return spillovers between Islamic and conventional banking rates: Evidence from emerging Islamic countries","authors":"Remzi Gök , Shawkat Hammoudeh , Ahdi Noomen Ajmi , Mehmet Balcilar","doi":"10.1016/j.bir.2025.05.012","DOIUrl":"10.1016/j.bir.2025.05.012","url":null,"abstract":"<div><div>This study examines return connectedness and spillover shock effects between Islamic profit-sharing rates (PSR) and conventional deposit rates (DPR) of banking sectors across various maturities in Türkiye and Malaysia. Overall, financing rates with various maturities in Türkiye act as transmitters of shocks in both banking sectors. Specifically, short-term rates serve as net spillover transmitters, while long-term rates of DPR and PSR emerge as primary transmitters and receivers, respectively. Total directional connectedness analysis reveals that the degree of integration between sectors fluctuates over time, with political instability and monetary policy actions being key drivers. Although conventional deposit rates dominate their Islamic counterparts in the early part of the study period, a significant policy rate hike in 2014 shifts this balance in favour of profit-sharing rates, suggesting that the conventional banking sector has become increasingly susceptible to shocks originating from the Islamic banking sector in recent years. Moreover, Türkiye's adoption of unconventional monetary policies has reduced integration within the banking system, thereby altering the dynamics of return spillovers, with deposit rates acting as main transmitters. We observe a relatively stable connectivity mechanism over time in Malaysia, where market risk becomes stronger as of 2020. Both short-term rates are net transmitters during most of the sample period, and medium- and longer-term tenors of the Islamic (conventional) banking sector function as net receivers (transmitters). DPR is shown to exert a substantial influence over PSR, with spillover shock effects being more pronounced for shorter tenors. While global factors strongly influence overall connectivity in Türkiye, local factors such as exchange rates, interest rates, and credit default swaps (CDS) play a critical role in net shock transmission. DPRs are shown to be dominant factors in predicting PSRs in Türkiye and both sectors exhibit stronger interactions at higher intervals of time.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 5","pages":"Pages 972-998"},"PeriodicalIF":7.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144895715","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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