Determinants of Survival in Islamic Banks

We examine the determinants of default in conventional and Islamic banks in Middle and Far Eastern countries. Our analysis is based on both accounting and macroeconomic data for the period (1995-2010) with a total of 421 banks from 20 countries. We adopt survival analysis approaches; namely the non-parametric Kaplan-Meier estimator and the semi-parametric Cox proportional hazards model. Our findings show that the hazard profile of Islamic banks is different than conventional banks with the former being about 64% less hazardous. We construct a country hazard opportunity cost which ranks banks according to the optimal operation environment and find that demographics do matter.