Islamic Finance

This paper studies the international transmission of bank liquidity shocks from multinational Islamic bank-holding companies to their subsidiaries. Based on a total sample of 120 Islamic and conventional bank subsidiaries, we test whether foreign bank lending is determined by different factors for Islamic and conventional banks. We estimate a model that includes subsidiary and parent bank characteristics as well as host and home country variables. Our empirical findings show that conventional parent bank fragility negatively affects lending by their subsidiaries.