Developing a Structural Model to Define Influential Risk Elements in Islamic Banking: An Empirical Study in Iran

摘要

The aim of this study is to identify the most influential risk elements and determine causal relationships network of risk factors in Islamic banking in Iran. Due to some unique principles used by Islamic banks, they encounter difficulties to manage various risks effectively than conventional banks. Consequently, a structural model was developed from a comprehensive set of risk elements with five reflective and one formative output construct namely; credit, liquidity, market, operational, unique risks and total risk by using PLs path modeling which statistically supports all constructs. Fitness Indices imply homogeneity among risk elements and statistics indicate not severe multicollinearity and redundancy in the model. This study provides key insight into causal relationships of influential risk elements in Islamic banking essential for proper resource allocation to compete with conventional banks.