Financial risk and Islamic banks' performance in the GCC countries
This study examines the relationship between financial risk and performance of Gulf Cooperation Council Islamic banks and the relative importance of the most common types ofrisk. The study covers 11 of the 47 Islamic banks of the Gulf Cooperation Council region from 2000 to 2012, based on the availability of data. Data were obtainedfrom the Bankscope database. For bank performance, the two most common measures, ROA and ROE, were alternatively used and for risk measures. Four types of financial risk were used, namely credit risk, liquidity risk, operational risk, and capital risk. Regression analysis indicate there exists a significant negative relationship between the Gulf Cooperation Council Islamic banks' performance, capital risk and operational risk. The results also confirm a significant negative relationship between Gulf Cooperation Council Islamic banks' performance. Furthermore, the results indicate that the most important type of risk is capital risk, followed by operational risk.