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Design of Early Warning System Model to Predict the Probability of Bankruptcy in a Selection of Islamic Countries Using Multiple Logit
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Mostafa Najari foroushani1   , Bahar Hafezi2 , Mostafa Rajabi3 |
1- PhD student, Department of Law and Economics, Khomeinishahr Branch, Islamic Azad University, Khomeinishahr/Isfahan, Iran
2- Assistant Professor, Department of Law and Economics, Khomeinishahr Branch, Islamic Azad University, Khomeinishahr/Isfahan, Iran , hafezi@iaukhsh.ac.ir
3- Assistant Professor, Department of Law and Economics, Khomeinishahr Branch, Islamic Azad University, Khomeinishahr/Isfahan, Iran |
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Abstract: (859 Views) |
There have been many financial crises in economies in recent decades, often with political, social, and economic consequences. One of these crises is bank bankruptcy, the destruction of which can be transferred to other markets. The Islamic banking system, which is relatively new and still growing in the banking industry, due to its religious characteristics such as non-interest-bearing activities, faces more risks and bottlenecks than other banks, which highlights the need to prevent them. In this article, with the aim of designing a an early warning model to predict the probability of bankruptcy in the banking system of 8 selected Islamic countries during the period 1998-2020, the Multinominal Logit Method was used. Bankruptcy was determined using the Z-Score and financial ratios were considered as variables affecting the probability of bank bankruptcy. In the Multinominal Logit method, it is possible to predict the occurrence of bankruptcy in two periods, before the occurrence and during / after the occurrence of bankruptcy. The results showed that the ratio of working capital to bank assets and the ratio of bank income before zakat and taxes to net assets in the period before and after bankruptcy had a negative effect on the probability of bank bankruptcy. The ratio of total bank debt to equity in both periods had a positive effect on the probability of bankruptcy. On the other hand, the ratio of accumulated profit to total bank assets in both periods did not have a significant effect on the probability of bank bankruptcy in selected Islamic countries.
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Article number: 9 |
| Keywords: Bankruptcy, Islamic Banking, Early Warning System, Multinomial Logit Model |
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Full-Text [PDF 825 kb]
(412 Downloads)
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Article type: Research |
Subject:
Special
Received: 2022/12/1 | Accepted: 2023/03/10 | Published: 2023/07/1
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