Comparative Predictability of Financial Stability in Islamic Banks: An Analytical Study of Malaysian & Pakistani Islamic Banks Using Altman’s Z Score

Abstract

The research was conducted for the comparison of monetary stability in the Islamic banking of Malaysia and Pakistan for this purpose the secondary data of year 2011 to year 2015 was analyzed by means of Altman’s Z score. Research results identified, the distress zone in Islamic banking sector of Malaysian, but Pakistani Islamic banks are in “Safe Zone”. Malaysian banks are found to be more unstable as compare to Pakistan Islamic banks. Hence, this study proposes stakeholders, which includes supervisory authorities and academics to be more observant of the procedures of Islamic Banks to satisfy the requirements of customers because the banking sector is significantly contributing in the growth of the economy.

Keywords: Z score, Islamic banks, financial stability, Malaysian and Pakistani Banks