Islamic Banks and Depositor Discipline: Evidence from Turkey

Ahmet F. Aysan, Bogazici University

Mustafa Disli, Ghent University

Huseyin Öztürk, University of Leicester

M. İbrahim Turhan, Borsa İstanbul

We look at market discipline in the Islamic deposit market of Turkey for the period after the 2000 crisis. We find support for quantity based disciplining of Islamic banks through the capital ratio. The evidence for price disciplining is, however, less convincing. In addition, we also look at the effect of the deposit insurance reform in which the dual deposit insurance was revised and all banks were put under the same deposit insurance company in December 2005. We observe that the reform increased quantity based disciplining in the Turkish Islamic deposit market.

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