Investigating the Costs of Religious Observance: Cross-Country Analysis of Islamic Banking

Abstract

This study regresses key variables that influence the profitability of Conventional and Islamic banks as measured by Return on Average Assets, to determine the impact of Islamicity on the profitability of the banks in a given country. The study compares 36564 banks in 77 countries belonging to both Islamic and non-Islamic countries. We find that Islamic banks have higher operating costs and overall experience lower return on average assets.