Ethnographic Research Essay

The focus of my study is the interactions inside a nursing home environment. I observed the social interactions between the elders and nurses, elders and family, and elders among other elders. The reason why I decided to study this particular group of people was primarily because my grandma currently resides in a nursing home. I also wanted to observe how elders keep up with relationships and social interactions when living in a nursing home. Although my grandma was at the nursing home where I did my observations, I did not observe her as a subject. The building I did my observations in was called the Johnson Center. It was a two-floor, dark and light brown building. The entrance on the outside of the Johnson Center was inviting, but once I went inside, there was a sadness that overcame my mood. There was also this distinctive scent, like mixed meatloaf and hand sanitizer, which attached itself in my nose during the entirety of my observations. The area I did my observations was located on the second floor, directly in the middle of the floor. There were five halls that lead from the dining room to the bedrooms of the residents, and to an â€Å"activity room† and the â€Å"living room,† which had couches, a TV, two parrots in a cage, and access to the outside patio area. But, the dining room area was the main focus of study of my observations. The dining room area was about the size of the classroom we hold class in. It had a tall ceiling with many windows that let in some natural sunlight. There was a black piano, which is where I sat when I did my observations. A clear windowed office filled the side of the dining room. The tables in this dining room were set up with white table cloths, red napkins, coffee cups and utensils. When lunch came out, the trays took over the majority of space left on the table. Some tables were completed with chairs, while other tables weren’t, since the elders in wheel chairs occupied that space. The noise level was at a low-medium during my observations. It only got noisy when the utensils hit the plates, or when small chats among the elders, nurses and families occurred. The environment was comforting, with a hint of sadness and despair. â€Å"Creating the conditions for self-fulfillment for aged care residents,† by Sonya Brownie and Louise Horstmanshof, shows a study that measured how 27 residents in a high-care facility in Ohio spent their day. Unbelievably, there was only 4% of the time dedicated to organized activities, while 25% was spend in the dining room, and 9% was eating. I think this article is the most relevant and important to my research because it describes exactly what I observed, the dining room, which was where the elderly spend most of their day. This article also explains the importance of relationships, the importance of maintaining relationships and the effects of relationship deprivation. The article states that â€Å"deprivation of meaningful relationships and social engagement adversely effects the physical and emotional well-being of older people, leads to feelings of isolation and loneliness,† which I saw when I observed the elders’ social interactions. I observed that lack of social interactions effect the way certain elders behave or react in the nursing home, and almost every elder showed some sign of depression or sadness. It is true to my observation on the interactions between elders and other elders, in which elders isolate themselves from the group, and thus respond back with hostile behavior towards one another. Without social interactions, the elders create a sense of loneliness and depression, and their personal identity, self-esteem and personal control are all shaken. The article, â€Å"Families and Elder Care in the 21st Century,† by Ann Bookman and Delia Kimbrel, studied the importance of finding nurses who have the ability to understand each elder and how to adapt to their behavior, as well as the significance of nurses of color in comparison to the Caucasian elders. â€Å"Although most Americans refrain from putting their elderly kin in nursing homes, Latinos, African Americans, and Asians are least likely to do so. Even elders of color with greater care needs, such as those afflicted with dementia or chronic illnesses, are more likely than whites to receive care from their children and live in the community with them.† This statement describes the reasoning as to why the elder population in this nursing home is predominately Caucasian. It is because in Latino, African American and Asian cultures have their elderly live with their children. Gerritsen, Steverink, Ooms and Ribbel are the authors of â€Å"Finding a useful conceptual basis for enhancing the quality of life of nursing home residents,† which describes the quality of life, what the quality of life is and how it should optimized. It also describes what the factors in the social integration. This is the most important part of the article because it highlights exactly what factors are needed in order to improve on the elderly’s wellbeing and what needs are needed within the nursing home. First is social integration needs, which includes the factors of growth needs, self-esteem needs, as well as love and belonging needs. The second is material resource needs, which includes safety and security needs, and physiological needs. Every one of these needs is necessary in creating an environment dedicated to the needs of the elders. This will enhance their quality of life and thus â€Å"be dependent on the degree to which they are able, with assistance, to meet those needs.† The last article I found that related most to my research is called, â€Å"Nursing home residents’ dependence and independence.† The focus of this article is the observation of the pattern of social interaction between nursing home resident and the nursing staff during mealtimes. This was very similar to my observations on the elders in the nursing. In fact, the results were almost the same, as well. The study showed that residents were rarely socially active, which is true for my observations. Stated in the conclusion of the article, â€Å"the response of the nursing staff to the residents’ social engagement was variable†¦however, they did not respond at all and seldom displayed engagement-supportive behavior.† This statement holds true to my observations on the elderly and nurses as well. Although, I only studied a total of 5 nurses, the nurses’ response to the elders definitely varied, but almost every time, the nurses did not engage with th e elders, unless they had a specific duty.

Developmental need of children from ages 0-8 years Essay

Development is the process of learning new skills and abilities. A child’s development is the term given to the development of infants through childhood. Although all children will go through the same stages of development, not all of them will go through these stages at the same time. Childs development can be measured by the five key stages of development which are emotional, social, physical, language and intellectual. A child will go through these stages of development in the first eight years of their lives. Child’s development relies heavily on their growth through their growth their developmental stages evolve significantly. Physical Development: 0-2 years: After a baby is born physical contact begins when they lie on their backs, they are also inclined to turn their heads to sounds and movements. By six months when they hear their name they turn around to see who is around, they can touch their toes and discover their fingers, smile at familiar faces. They are able to put things in their mouth. As the child grows older they become more agile and will be able to crawl and shuffle around and may even attempt to walk unaided, raise their arms to be lifted, able to reach and hold food in their hands. At two they should be in the early stages of walking and feeding themselves. They become very independent at this age. 3-5 years: Within the ages of 3 to 5 the stages of child development get stronger. At this point they will have been able to walk up and down the stairs, catches a gently thrown ball, learns how to paint and names of colours, identifying them. At the age of four a child with have mastered pedalling their bikes, they are aware that this is how it is manoeuvred. They will be able to throw with aim. By the age of five the child will be able to copy shapes and letters, have more self control with their writing instruments. 5-8 years: By the time the child is between the ages of five and eight they will have developed immensely. Their concentration levels will have developed. They become more accustomed to discipline within an educational setting, their skills for drawing will have enhanced now knowing to colour between the  lines and their drawing will more resemble the objects they are trying to create. Intellectual Development: 0-2 years: Within the early months a child will make eye contact and focus on objects, they will also learn the sound of their mother’s voice. By six months the will be developing their co-ordination they will be reaching out with their hands to grasp an object offered to them. By twelve months they shall be developing their memory and will have the ability to remember thing such as a familiar face a favourite toy or comforter. They will also express emotions crying and laughing if others around do so they will express their emotions without knowing why. At the age of two a child will be amusing themselves with ‘pretend’ play with favourite toys they have and will adapt to making sounds from a variety of instruments. 3-5years: At the age of three a child will develop the stage of pretend play and become more complex. Their concentration span will increase; their memory will be developing very quickly. They will then be able to relate and understand past and future. By the age of five they will have a great understanding of numeracy and literacy, learning to count confidently. At this age they tend to become very curious and inquisitive and ask endless question, always needing to know about things. 5-8 years: By the time a child reaches this age they will be very independent. Their reading and writing skills will have progressed and advanced immensely. They will have developed in their drawings now resembling objects they want, they will be developing intellectually every day adjusting to education in a stronger sense than in their earlier years. Language Development: 0-2 years: Babies are only capable of expressing their language through crying, cooing and gurgling within the first 3 months, as they get older they become more expressive, responding to sound, laughing and imitating other sounds or noises. Although only and infant and unable to form sentences yet babies will begin mimicking animal noises or saying singular words such as (mama or  dada). By the time a child is two it is thought that they have a vocabulary of almost 50 words. Children of this age will begin to talk at a rapid speed and are said to enjoy taking part in conversations. 3-5 years: Children from the age of three shall now be able to speak in sentences expressing their vocabulary using past and present tenses without understanding that they are doing so. They enjoy hearing stories and listening to music at this age. By the time they are four they are likely to become very inquisitive asking a variety of questions about different things. 5-8 years: The child’s vocabulary will have increased significantly. They are very confident speakers and will have a great understanding of many words although they may not always use them. By eight years old they will be able to give accurate descriptions and should be able to recognise similarities. Emotional Development: 0-2 years: Within the first few months of an infant’s life they will show many expressions and shall be able to identify their mother and fathers voice. They thrive through interaction and are very trusting and they enjoy the contact with others. By the time a child is a year old it will be used to familiar faces and will become extremely wary of unfamiliar faces and may become distressed in their company. They also imitate the feelings of other people not knowing the reason why they are copying their reactions. When the child is two they develop fears and phobias such as fear of the dark or spiders. The child sense of identity progresses rapidly at this point. 3-5 years: They are more aware of their feelings and emotions at this stage; they are able to express how they feel. Increase in imagination. They are accepting to other people’s feelings and capable of concealing their own emotions. By the age of five as child will be very good at controlling their emotions. 5-8 years: Showing signs of competitiveness. Arguments emerge through competitiveness, either with siblings or students which will make the child more stubborn and demanding. Mood changes start to appear by the age of eight. Less arguments as they become more mature. Children depend greatly on peer approval; becoming accepted is highly rated at this age. Social Development: 0-2 years: Babies are very sociable. They like to know and participate in what’s going on around them. They enjoy company immensely. They may also begin to feed themselves as their social skills begin to develop. By the time a child is a year old they will have become less dependent on interaction as they will have learned to play alone. At the age of two they will be very independent and will insist on dressing and feeding themselves. 3-5 years: Capable of making friends and learning how to share and take turns. At this age they will resort to tantrums if they do not get their own way. Enjoy socialising. Forge friendships. By the age of five they will have made a number of friends. They will have a great understanding of what’s right and wrong. 5-8 years: May become less sociable and may wish to spend more time alone. May have a vast number of friends to whom they may fall in and out of company with. Prefer to surround themselves with trusted companions. As their confidence grows they will find their place in the social circle to which they are comfortable with.

Newspaper Op-Ed Article Example | Topics and Well Written Essays - 500 words

Newspaper Op-Ed - Article Example Legislations aim at safeguard the functionality of a given institution. The bill being proposed to allow the patients to choose whether to use experimental drugs, shall mean medical practitioners are have limited control in matters public health. Any action requires an individual to take responsibility. The medical code of ethics means that each doctor or nay other health officer is enshrined by a given set of roles thus must adhere to these rules. This implies that any effect of a given drug to a patient. My allowing the use of experimental drugs will mean that each patient would be liable if the drug negatively affects them. This will mean that the doctors and other medical officers will be reduced to inactive members in public health. This will culminate into malpractices by these officers with knowledge that the existing regulation protects them from any punishment. This will hence undermine the essence of ethical code of conduct. The patients will be subjected to commercialized health system that cares less on practitioners’ ethics. The bill fails to specify under which circumstances the experimental drugs will be used. The loophole in the bill will create room for the medical practitioners to use these drugs for their own benefits. This will entail using humans as ‘guinea pigs’ in an attempt to create a product that commercially benefit the doctors administering treatment. The use of human in test the raises the question on the ethical components of the experimental drugs. Companies will collaborate with health providers in a scheme to test their drugs on humans. The patients will subject to a series of drugs without their knowledge. The essence of any public health institution is to ensure the patient’s welfare is protected. The physicians in any facility should ensure any activity improves the wellbeing of their patients. In any terminal illness case there is the question of when should the ending

E-Marketing Review for Easy Jet Essay Example | Topics and Well Written Essays - 5000 words

E-Marketing Review for Easy Jet - Essay Example By the year 1999, the airline grew to be the fifth biggest airline in the US in context of the total number of domestic passengers it flied. Not only the airline grew in size but it also managed to be profitable for the entire period of thirty odd years when many well established large airlines like the USAir or the Continental were making losses. This established the fact that there is room for low cost no frills airlines like Southwest and if operated judiciously, the model could offer good revenue and profit. In Europe the initiator of low cost model of airlines was Ryanair, an Irish company, which incidentally when launched in 1985 was offering traditional airlines services but at a comparatively lower price. Though Raynair’s low prices pushed big competitors like British Airways to reduce their prices, yet Ryanair itself was unable to make any profit till 1991. But during this period the management gave a visit to Southwest’s Texas operations and came back decided to introduce the no frill low cost structure in their airline also. This resulted in profit in 1992 and since then Ryanair has become a marquee name in this industry. (Doganis R., 2006). In the year 1995 EasyJet was founded by Haji Ioannou based on the same philosophy of low cost and no frills, in footsteps of Ryanair and Southwest airlines. EasyJet has setup its base at Luton airport which is a secondary one, to cut operational costs and beat congestion and maximize turnaround time. The airline has been successful in implementing the low cost model and has become the 2nd largest airline in the low cost arena, just after its main competitor Ryanair in Europe (Rothwell S., October 2008). At the initial stages during 1995 EasyJet operated with two Boeing 737-200 aircrafts which were leased and contract pilots and other staff. Financials: EasyJet had revenue of  £1797.2 million in 2007 with corresponding profit of  £ 152.3 million. In 2008 EasyJet had much

Application of concept analysis to clinical practice Essay

Application of concept analysis to clinical practice - Essay Example The concept applied in clinical practice is confidentiality. It is an essential element in clinical practice because all aspects of participation of the patient and medical practitioner revolve around confidentiality and consent.The medical practitioner is responsible for ensuring that all medical records are kept in a confidential manner. The reliability of information and data is an important keystone to good medical practices. In most cases, patients are content with undergoing clinical tests as long as they can entrust confidential information and data to medical professionals. The distinguishing feature of clinical practice is that most of the information affects patients and their family members (Pinch, 2000). Therefore, the principles of data protection and confidentiality are crucial in the provision of services within the healthcare sector. This also gives the patient assurance that the clinical practitioner can reassure privacy. It is vital to note that this is not always a ssured in the clinical context where results of a clinical test may provide information about the patient and their family members. For instance in genetics, the results of a clinical test provides information about the patient and his family members. As the scope of clinical trials and practice increases, it is paramount for the clinical practitioner to ensure that information is managed in a proper manner. The management of clinical information may present challenges to healthcare professional and patients. Patients expect clinical professionals to access their medical information, and use their clinical experience and expertise to interpret the information and data in order to provide appropriate medical advice (Brown & Stobart, 2008). The information used in the clinical context may be private and personal. Intrusion into patient privacy is generally justified by the assumption that the patient has authorized access to the information (Pinch, 2000). The information obtained may generate inferences to other family members. The views of the other family members may be unknown. Additionally, they may disapprove access to such information. This means that the information is generated in confidential circumstances to one individual, but it is significant to other people. Clinical practice may want to use this data and information to help the patient and other people involved. However, clinical practice is unsure whether it is acceptable within the precincts of confidentiality and data protection. Method of Analysis In this case, the authors of the article examine confidentiality from a theoretical perspective. The article uses concept analysis and clinical based empirical investigations. A review of literature and clinical practices defines consequences, attributes, antecedents and empirical references (Pinch, 2000). The article relied on the themes from the definitions of confidentiality. These were provided by participants in various projects within the scope of genetics and HIV/AIDS. The method of analysis provides updated guidance on the issues of confidentiality and consent in clinical practice. The method focused on clinical professionals. The methods were resultant features of proposals that focused on the use of clinical tests, trials and results (Pinch, 2000). The method also recognized that the issue of confidentiality in clinical practice was becoming relevant. Most importantly, the article introduced the principles of confidentiality and consent in clinical practice. This was expanded using clinical cases and illustrations. Steps of the Process The steps for ensuring confidentiality in clinical practice are based on the code of standards of conduct, ethics and performance for midwives and nurses. According to such codes, clinical practice must respect the rights of people to confidentiality. Clinical professionals must also ensure that people are informed about clinical process (Pinch,

Timeline Essay Example | Topics and Well Written Essays - 250 words

Timeline - Essay Example Ferguson. This case declared that laws which created separate, but equal schools for black and white students, unconstitutional (McBride, 2006). 1964 - Civil Rights Act – This is legislation that outlawed discrimination based on race, color, religion, sex or national origin. It ended racial segregation in schools, in the workplace and in facilities (Whalen, 1985). 1971 – Sawnn v. Charlotte-Mecklenburg Board of Education – The court ruled that when finding ways to handle the issue of illegal segregation in schools assigning students to bussing was legal (Mickelson, 2001, p. 215-252). 2003 – Grutter v. Bollinger – This case upheld affirmative action in education as long as there was a â€Å"highly individualized, holistic review of each applicant’s file† and in which race was not considered (Cornell University Law School, n.d.). The consequences of each of these cases eventually lead to total desegregation in the United States. As the timeline shows, with each case, the laws became more and more open to equality among the races. In terms of schools and children, there is now no desegregation and schools are racially diverse as well as the transportation to those schools. Students from any race are allowed to attend their public neighborhood school without issue thanks to the people who pursued these cases. Epstein,  L., & Knight,  J. (2001). Piercing the veil: William j. brennans account of regents of the university of california v. bakke. Yale Law & Policy Review, 19(2), 341-379. Retrieved from http://www.jstor.org/stable/40239568 Mickelson,  R.  A. (2001). Subverting swann: First and second generation segregation in the charlotte-mecklenburg schools. American Educational Research Journal, 38(2), 215-252.

Electoral College Reform Research Paper Example | Topics and Well Written Essays - 1000 words

Electoral College Reform - Research Paper Example There are other viewpoints as well but this discussion is going to focus on these topics. In the opinion of this author, Electoral College, even if it has certain flaws, provides the best compromise to ensure a federalist, all inclusive, judicious method to elect the American leadership. It is also proposed that instead of breaking down the system altogether, the flaws are addressed through other means. Context To set the stage for describing and placing arguments related to opinions on Electoral College Reform, it is essential to briefly describe the process. Electoral College is used to elect the President and Vice President of the United States. It is a form of indirect election in which the public casts their vote to elect â€Å"Electors† in their respective states. These Electors are authorized to eventually vote on their behalf to choose the President. The nationwide group of electors and the process through which this two tier voting takes place is called the Electoral College. Each state is allocated a number of electors equal to the state’s representation in the House of Representatives plus the Senate. This allocation is based on the census and this means that more populous states have more electors than the less populous ones. However, as a minimum, each state has three to four electors. Since it is binding on each elector to vote for their party’s candidate, the result for Presidential election becomes clear after the first tier of voting. The total electors at this time being 538, whoever gets past 270 electors, wins the election. In the first tier of direct voting, a winner-takes-all system is followed. This means that whichever party’s electors get more than 50% of votes cast in a particular state, all electors for that party go to the Electoral College. The debate In the past 200 years, there have been â€Å"more proposals for constitutional amendments on changing the Electoral College than on any other subject† ("How the Electoral College Functions"). Presidential elections in the year 2000 rekindled the long held debate about the efficacy and democratic nature of elections through the Electoral College. In that year, George W. Bush beat Al Gore through a very small margin of Electoral College votes despite the fact that Al Gore was leading in the popular vote count. The controversy that was raised was eventually decided in the Supreme Court which ruled to stop voter recounting and the Bush was consequently accepted as the winner. So, the question that became fresh in everyone’s minds was why in the future the Americans should not decide on their President through the more representative popular vote rather than through the indirect Electoral College? In the current system, a candidate can lose the elections through the Electoral College even if he or she has more cumulative nationwide popular vote. Gore lost the election because the electoral votes in the swing state of Florida e ventually went to Bush. Proponents of election through popular vote (Neale 2-3) present two arguments against the Electoral College method. Firstly, they claim that the idea of not considering popular national vote is against democratic principles. According to them, the intermediate step of Electoral College takes away the national voter’s franchise and that the choice for the person holding

Assignment Case Study Example | Topics and Well Written Essays - 250 words - 3

Assignment - Case Study Example The two main principles comprises of the superior quality and the superior efficiency. The superior efficiency include the experience curve and the learning effect   (Hill & Jones, 2013). On the other hand, the superior quality entails its excellence and reliability. As illustrated in the diagram below Superior efficiency can gladly be achieved through designing products for easy manufacturing and organizing self-managing institutions. Additionally, it was evident from the study that the superior quality can be achieved by finding ways of measuring the quality and reduce costs and error. Another important principle that was all evident in the study is superior innovation. In ‘superior design, there are proper principles when better design and good process of manufacturing are in place. For instance the average time between the part failure rose from 2500 hrs to 170000 hrs. There was a massive improvement that rose from the best manufacturing and design

The impact of environmental laws on property management in the UK Dissertation

The impact of environmental laws on property management in the UK - Dissertation Example Projections are given in regards to the overall success in a broad sense of the present model of progress benchmarks along the way towards safer industry and human activity with respect to Earth's ecosystems. These needs are compared with the goals and interests of property owners. Table of Contents Declaration †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.4 Preface †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.4 Introduction †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.4 Literature Review Part One †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.5 Literature Review Part Two †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.35 Literature Review Part Three †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.45 Methodology †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.59 Findings †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.59 Conclusion and Recommendations †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.61 References †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. p.65 Declaration As a part of the European Union, the United Kingdom must adapt existing territor ial legislation into harmony with existing environmental policy. Most modern environmental legislation in Europe is passed down from United Nations International treaties, to be ratified by the European Union, and disseminated for review to individual nation states. All property owners have an obligation to respond to environmental policies and regulations, even those not engaged in heavy industrial waste production. Preface This study constitutes an analysis of environmental regulations as they exist in the United Kingdom pertaining to housing and property management. The practice of environmental regulation and enforcement is detailed. Findings, conclusions and recommendations follow the primary literature review. Introduction The most basic definition of the environment would be that which is not ourselves, and yet we all live in a world of interconnectedness and interrelationships were all are affected by the actions of others whether or not we are aware of them. A more detailed legal definition is in order, however: "Environment shall mean the space with all living organisms and natural resources, natural and man-made values, their interaction and the entire space in which people live and in which settlements, goods in general use, industrial and other facilities, including the media in the areas of the environment, are situated. " (Home, 2007) It is reasonable suppose that any contrived separation of any individual or organization from the environment is an illusion. And it is thus the responsibility of all citizens, and all commercial enterprises to cultivate a principle of stewardship for and within their greater environment. This study will relate principally to environmental policies pertaining to property ownership in the United Kingdom, specifically the rules and regulations in regards to legal compliance with environmental laws relevant to both residential and commercial property owners. The intent of environmental policy will be described in acco rdance with United Nations and European Union mandates which are then disseminated into laws by the various member nations. The means by which these laws are implemented, the challenges in their implementation, and the ramifications of these legal principles for the environment and for the rights of property owners shall be detailed. Literature Review Part One There is no doubt as to the necessity of a certain responsible level of environmental regulation in the field of housing and property management. The importance of environmental controls can be regularly seen in clean air and pristine water, especially when it is contrasted

Employee relations Coursework Example | Topics and Well Written Essays - 1250 words

Employee relations - Coursework Example The relationship at workplace can be between any person in the organization, between coworkers, between workers and their superiors, between members who are in the same management among others. In any working environment, it is mandatory for employees to share a relationship that is healthy with one another so that they can ultimate product of their input is done to their best. In any workplace, the relationship that exists between the top management and the employees are of great value. Human relations starts from the starting point of employee training, addressing the needs of the employees, fostering an employee working place culture and resolving the conflicts that arises at the working environment between employees or employees and the top management. Every individual at working place shares a particular relationship with his or her fellow workers. Human beings at places of work are not machines who begin working at the press of a mere button. The employees need fellow workers whom they can talk to and share ideas, happiness and sorrow with each other. A healthy relation of employees reduces problems of absenteeism at the places of work when there is a good relation, individuals tend to be serious and put more effort towards their work. They do not take frequent leaves and do enjoy their work and the working environment. Employees’ incidents of complaints will reduce and start giving inputs to their best. Unitarist perspective This perspective assumes that an organization is an integrated and harmonious whole that deals with ideal of "one huge happy family". Its assumption is that the top management in the organization and other staff members all share a common purpose, emphasizes cooperation and have similar set of values, objectives and interests.

Explain the theory of Virtue Ethics Essay Example for Free

Explain the theory of Virtue Ethics Essay Aristotle originally introduced virtue Ethics to society in ancient Greek times. Virtue Ethics tells us that we should look at the character of the person instead of the actions or duties a person performs. Instead of concentrating on what is the right thing to do, virtue ethics asks how you can be a better person. Aristotle claims that leading a virtuous life is easy, and those who do, do so to be happy. Happiness is the ultimate goal for everyone in life. To become a better person, you must practice virtuous acts regularly. After a while, these acts will become routine and so the virtuous acts will be nothing more than everyday life and the person a virtuous person. Aristotle said that although virtues should become a habit we must never forget that we behave in such a way because it is right. For example, if a singer practices singing everyday, they will become better at it and used to doing it. This is the same as people who practice their virtues and soon automatically act in the right way, by practicing our skills we improve them, becoming happier. Virtues should not be an effort, but simply a part of everyones personality. Aristotle says that virtue is something that we acquire and are not just born with, people are not inherently good or bad, but become good or bad according to the habits they develop. Aristotle said that a virtue was a Golden Mean in between to vices. These Vices are two extremes of a scale at opposite ends, one of excess and one of deficiency. For example the vices would be shamelessness and shyness, and the virtue modesty. Another example of this would be rudeness and a sense of humour as the two vices and the virtue as wittiness. Such virtues must be cultivated, we must learn when to use certain virtues and to what extent, for example we must not ever use humour in excess to act like a fool, but at the same time we must also not pass into rudeness. Two philosophers, Anscombe and MacIntyre say that there has been a mistake in how virtues have been portrayed. The majority of people look at the actions a person does to judge whether they are virtuous or not. The way in which we behave provides an opportunity for others to judge our virtues and vices. This however is not right. People should look at the character within and  look at what the person believes is right and how they think they should help people instead of what they do to help. A famous example of a virtuous person is Mother Theresa. She helped millions of suffering people across the world and for this became well known as a virtuous person. There are hundreds of other virtuous people who would have liked to have helped but were unable to do so in such a huge way who are not considered as virtuous, but these people are just as virtuous but not recognised for it. Aristotle tells us that we are most likely to learn virtuous behaviour from watching others. If we experience others being kind to us and see the happiness it creates we are more likely to practice it then if we were just told to do it. For example, if we were told to be courageous we may occasionally stand up for small things that we disagree with, but if we see someone telling others off for not doing the right thing then we are more likely to not allow bad behaviour towards ourselves. Aristotle said that the best way of becoming virtuous was to follow in the footsteps of a virtuous person, e.g. Mother Theresa and do what they do. Virtue Ethics is relative; Aristotle recognised that virtues in one country may not be the same as virtues in another. He believed that there was no absolute platonic good beyond our world. As virtues have evolved through habits of society it is probable that different societies would deem different actions good or bad. However there is no difference between the virtues of a community and individuals within that community, the supreme happiness that Aristotle talks about is one for the community, and not just and individual. MacIntyre suggests that philosophy is too far removed from ordinary life and said that it is not good enough that philosophers spend their time debating the nature of ethical language or forming reasoned theories of morality in a way that is far removed from real people and real life. All actions are done in order to reach an aim. A successive series of actions are also for an aim, for example getting up in to morning to go to work, is to make money, is to feed our families is to go on nice holidays is to but them nice things etc. all ultimate aims is to make people happy, everything is subordinate to the supreme good, which is happiness. Everyone has  different ideas of what happiness is and different things all make different people happy, and Aristotle called this feeling of all round well being eudemonia. Therefore, Virtue Ethics concentrates on what a person is then what a person does. Its aim is to achieve something, which people genuinely want rather then being based on arguably incoherent ideas about the after-life. It is a system, which can be easily applied and understood by all. It fits into a variety of philosophies, and religions, which both do and dont include God. However, there are a few problems with Virtue Ethics. Ones of these which has been pointed out by MacIntyre is that although a virtue is the golden mean between two vices it cannot be applied to all virtues. Virtues such as promise keeping, loyalty, and compassion do not fall between any two vices and so Aristotles theory of this does not really work. Another problem with this theory is that it is of little help to people faced with a moral dilemma. It does not help them make a decision like other theories such a natural law or utilitarianism.

Impact of Internal Factors on Islamic Banking

Impact of Internal Factors on Islamic Banking Introduction to the Subject Background of the Subject General Objective The purpose of this study is to examine how the internal factors of the Islamic Banking affected their performance before, during and after the financial crisis in the GCC in comparison to the conventional banking in the same area. Research Questions This study aims to answer the following questions: How did the financial crisis affect the profitability of Islamic Banks in comparison to Conventional Banks? What are the internal factors (bank specific characteristics) that influence the profitability of Islamic banking for every year from 2006 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 2009? Did these factors have the same impact on the profitability of Islamic Banking before, during and after the financial crisis? Did these internal factors influence the profitability of Islamic Banking in the same manner as of the Conventional Banking? Need for the Study Significance of the Study Assumptions of the Study Limitations of the Study Although we cannot neglect the importance of the external factors on the profitability of Islamic Banking, they were not included in this study. To understand the reason behind this decision, we need to go through the different types of external factors and how they are classified: Macroeconomic Factors Country Regulation Rules Bank Regulation Rules These factors were not included for the following reasons: Since we are examining the performance of 92 banks (27 Islamic Banks and 65 Conventional Banks) in 6 countries, the number of countries used in the study is not significant enough to study the impact of GDP and inflation accurately on Bank profitability especially when examining each year separately Country Regulation Rules as per the IMF Database, although it differs slightly for the selected countries, did not change over the period from 2006 to 2009. This means that for each bank, these factors remained constant. Data about Bank Regulation Rules could not be obtained for GCC banks Delimitation of the Study This study was delaminated to the Islamic and Conventional Banks in the GCC whose data could be obtained in the Bankscope database. Chapter 2: Literature Review Overview of Islamic Banking Islamic Baking has established as an alternative to conventional interest-based banking. The first stirring of the Islamic Banking movement began in 1963 by Dr. Ahmed Alnajar in a small town in Egypt, called Mit Ghamar. Dr. Alnajar completed his education in Germany and found that it had many saving banks operating on interest. He took the idea from a savings bank in Germany and created his own small Islamic bank that was interest free. After Dr. Alnajarà ¢Ã¢â€š ¬Ã¢â€ž ¢s small bank proved successful, the establishment of other Islamic banks followed. In 1971, the Nasser Social Bank was founded in Egypt with the objective of lending out money as a charity on the basis of a profit and loss sharing system and helping people in need. And in 1975, the idea of Islamic banking spread to other Islamic regions such Dubai Islamic bank in United Arab Emirates and The Islamic Development (IDB) Bank in Jeddah, Saudi Arabia (Wilson, 1990). Even though Islamic Banking has only been around for thirty years and is still in an evolving stage, Islamic Banking is the fastest growing segment of the credit markets in the Muslim countries. In 2009, Assets held by Islamic Banking banks rose by 28.6 percent to $822bn from $639bn in 2008, according to The Bankerà ¢Ã¢â€š ¬Ã¢â€ž ¢s à ¢Ã¢â€š ¬Ã…“Top 500 Islamic Financial Institutionsà ¢Ã¢â€š ¬? survey while conventional banks posted annual asset growth of just 6.8 percent. Furthermore, GCC states accounted for $353.2bn or 42.9 percent of the global aggregate, while Iran remained the largest single market for Shariah-compliant assets, accounting for 35.6 percent of the total. Source: Asian Banker Research, 2009 Finally, Islamic banking operations are not limited to Islamic countries but are spreading throughout the world. One reason is the growing trend toward transcending national boundaries, and unifying Muslims into a political and economic entity that could have a significant impact on the pattern of world trade (Abdel-Magid, 1981). Islamic Banking Rules and Principles Islamic banking rules are according to the Islamic Shariah derived from the Quran and prophet Mohamedà ¢Ã¢â€š ¬Ã¢â€ž ¢s sayings. The three main practices that are clearly prohibited in the Quran and the prophetà ¢Ã¢â€š ¬Ã¢â€ž ¢s sayings are, Riba (Interest), Gharar (Uncertainty), and Maysir (Betting). Prohibition of Riba or any predetermined or fixed rate in financial institutions is the most important factor in the Islamic principles pertaining to banking. As stated in the Quran à ¢Ã¢â€š ¬Ã…“Allah forbids ribaà ¢Ã¢â€š ¬?. Riba means an increase and under Shariah the term refers to the premium that must be paid by the borrower to the lender along with the principle amount as a condition for the loan (Omar and Abdel, 1996). Gharar occurs when the purchaser does not know what has been bought and the seller does not know what has been sold. In other words, trading should be clear by stating in a contract the existing actual object(s) to be sold, with a price and time to eliminate confusion and uncertainty between the buyers and the sellers. Maisir is considered in Islam as one form of injustice in the appropriation of othersà ¢Ã¢â€š ¬Ã¢â€ž ¢ wealth. The act of gambling, sometimes referred to betting on the occurrence of a future event, is prohibited and no reward accrues for the employment of spending of wealth that an individual may gain through means of gambling. Under this prohibition, any contract entered into, should be free from uncertainty, risk and speculation. Contracting parties should have perfect knowledge of the counter values intended to be exchanged as a result of their transactions. Therefore, and according to Ahmed and Hassan (2007), the principles of Islamic banking and finance enshrined from al-Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an and Prophet Mohamedà ¢Ã¢â€š ¬Ã‹Å"s Sayings can be summed up as follows: Any predetermined payment over and above the actual amount of principal is prohibited. The lender must share in the profits or losses arising out of the enterprise for which the money was lent. Making money from money is not acceptable in Islam. Gharar (deception) and Maisir (gambling) are also prohibited. Investments should only support practices or products that are not forbidden or even discouraged by Islam. Islamic Banking Products Islamic Banking products have to be done according to Islamic rules and principles, based on profit and loss sharing as well as avoiding interest. According to BNM statistics 2007, Al Bai Bithaman Ajil financing is the most common in Islamic Banking. There are a lot of Islamic Banking products; however there are some famous Islamic products that will be discussed in this section. Al Bai Bithaman Ajil /BBA This involves the credit sale of goods on a deferred payment basis. In BAA, the Islamic bank will purchase certain assets on a deferred payment basis and then sell the goods back to the customer at an agreed price including some margin or profit. The customer will make payment by installments over an agreed period. A fixed rate BBA is a powerful hedging tool against interest rates (Rosly, 1999). Murabahah Murabahah is a contract of sale. The Islamic Bank acts as a middle man and purchases the goods requested by the customer. The bank will later sell the goods to the customer in a sale and purchase agreement, whereby the lender re-sales to the borrower at a higher price agreed on by both parties. These are more for short term financing Mudharabah According to Kettel (2006), Mudharabah is a basic principle of profit and loss, where instead of lending money at a fixed rate return, the banker forms a partnership with the borrower, thereby sharing in a ventureà ¢Ã¢â€š ¬Ã¢â€ž ¢s profit and loss. Mudharabah is an agreement between the lender and entrepreneur, whereby the lender agrees to finance the project on a profit sharing basis according to a predetermined ratio agreed by both parties concerned. If there are any losses the lender will bear all the losses. Musharakah Musharakah means partnership whereby the Islamic institution provides the capital needed by the customer with the understanding that they both share the profit and loss according to a formula agreed before the business transaction is transacted. In Musharakah all partners are entitled to participate in the management of the investment but it is not compulsory. Musharakah can help in providing financing for large investments in modern economic activities Al Ijarah Ijarah means meaning to give something on a rental basis. In Ijarah, the bank acquires ownership based on the promise and leases back to the client for a given period. The customer pays the rental but the ownership still remains with the bank or lender. As the ownership remains with the lessor (bank), it continues to give the service for which it was rented. Under this contract, the lessor has the right to re-negotiate the quantum of the lease payment at every agreed interval to ensure rental remains in line with the market rates (Hume, 2004). Wadiah Wadiah is a trust contract and the bank provides gift (hibah) and various types of benefits to the customer. This is exactly like a normal conventional savings account. Istisna Istisna allows one party buys the goods and the other party undertakes to manufacture them according to agreed specifications. Normally, Istisna is used to finance construction and manufacturing projects. Salam Salam is defined as the forward purchase of specified goods with full forward payment. This contract is normally used for financing agricultural production. According to Hassan (2004), Salam based future contracts for agricultural commodities, supported by Islamic Banks, can help to overcome the agricultural financial problems Table 2.1 lists the products of conventional banking and their correspondent products in Islamic Banking. Deposit Services Current Deposit Wadiah Wad Dhamana / Qard Hasan Savings Deposit Wadiah Wad Dhamana / Mudaraba General Investment deposit Mudaraba Special Investment deposit Mudaraba Retail / Consumer Banking Housing Property Finance BBA / Ijara wa Iktina /Diminishing Musharaka Hire Purchase Ijara Thumma Al-Bai Share Financing BBA / Mudaraba / Musharaka Working Capital Financing Murabahah/ Bai Al-Einah/ Tawarruq Credit Card Bai Al-Einah/ Tawarruq Charge Card Qard Hasan Corporate Banking/ Trade Finance Project Financing Mudaraba / Musharaka / BBA / Istisna / Ijara Letter of Credit Musharaka/ Wakala/ Murabaha Venture Capital Diminishing Mudaraba/ Musharaka Financing Syndication Musharaka + Murabaha/ Istisna / Ijara Revolving Financing Bai Al-Einah Short-term Cash Advance Bai Al-Einah/ Tawarruq Working Capital Finance Murabaha/ Salam/ Istijrar Letter of Credit Murabaha Letter of Guarantee Kafala + Ujr Leasing Ijara Export/ Import Finance Musharaka/ Salam/ Murabaha Work-in-Progress, Construction Finance Istisna Bill Discounting Bai al-Dayn Underwriting, Advisory Services Ujr Treasury / Money Market Investment Products Sell buy-back agreements Bai al-Einah Islamic Bonds Mudaraba / Mushraka + BBA / Istisna / Ijara Government Investment Issues Qard Hasan/ Salam/ Mudaraba Other Products Services Stock-Broking Services Murabaha/ Wakala/ Joala Funds Transfer (Domestic Foreign) Wakala/ Joala Safe-Keeping Collection (Negotiable Instruments) Wakala/ Joala Factoring Wakala/ Joala/ Bai al-Dayn Administration of Property, Estates and Wills Wakala Hiring of Strong Boxes Amana/ Wakala Demand Draft, Travellerà ¢Ã¢â€š ¬Ã¢â€ž ¢s Cheques Ujr/ Joala ATM Service, Standing Instruction, Telebanking Ujr Source: Obaidullah, 2005 Financial Crisis and the Islamic Banking Previous Literature The study of bank profitability is an important tool to evaluate bank operation by examining the different factors affecting bank profitability and using these factors for management planning and strategic analysis. In the last four decades, many studies have been conducted to study both bank profitability and the determinants of bank profitability either for particular country or for a panel of countries. These studies normally divide these factors into internal factors and external factors. Internal factors represent the bank-specific characteristics such as bank size, liquidity structure; liabilitiesà ¢Ã¢â€š ¬Ã‚ ¦etc while external factors can be macroeconomic factors such as inflation and GDP growth or Country-specific regulations rules and practices. In the area of banking profitability, many studies have been conducted to investigate the profitability of conventional banks while only few were conducted in the field of Islamic banking. In this chapter, we will review these studies for conventional banking first and then will focus on studies in the Islamic banking field. Then we will cover the conceptual framework of this research. Conventional Banking Different studies have been conducted in the field of conventional banking profitability. Short (1979), Bourke (1989), Molyneux and Thornton (1992), Goddard, Molyneux, and Wilson (2004), Peters et al. (2004) are some of the researchers in the field. Short (1979) is one of the early scholars who studied the relationship between banking profit rates and concentration for sixty banks in Canada, Western Europe and Japan during the 1970à ¢Ã¢â€š ¬Ã¢â€ž ¢s and he included independent variables including government ownership and concentration by using H index to quantify concentration. Results showed that the government ownership impact on profitability varied throughout the countries studied but expressed an overall negative relationship. He also found evidence that indicated higher concentration rates lead to higher profit rates (Short, 1979). Bourke (1989) also compared concentration to bank profitability but included other determinants. Bourke (1989) covered ninety banks in Australia, Europe, and North America between 1972 and 198 and examined different internal and external factors: internal factors such as staff expenses, capital ratio, liquidity ratio, and loans to deposit ratio; external factors such as regulation, size of economies of scale, competition, concentration, growth in market, interest rate, government ownership, and market power. His results show that increase in government ownership leads to lower profitability in banking. He also found that concentration, interest rates, and money supply are positively related to profitability along with capital and reserves of total assets as well as cash and bank deposits of total assets. Bourke adds that well capitalized banks enjoy cheaper access to sources of funds as they are less risky than less capitalized banks (Bourke, 1989). Later, Molyneux and Thornton (1992) studied the determinants of European banks profitability. The paper examined eighteen counties in Europe between 1986 and 1989. This paper replicated Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s (1989) work by using internal and external determinants of bank profitability. However, Molyneux and Thornton (1992) results showed that government ownership expresses a positive coefficient with return on capital (profitability) which contradicts with Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s findings. Other results were similar to Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s, showing that concentration, interest rate, and money supply were positively related to bank profitability (Molyneux and Thornton, 1992). In one of the recent papers on bank profitability on European banks, Goddard, Molyneux, and Wilson (2004) shows similar findings to the paper by Molyneux and Thornton (1992). It investigates the determinants of profitability in six European countries and it covered 665 banks between 1992 and 1998. The study used cross-sectional and dynamic panel models. The variables used in the regression analysis were ROE, the logarithmic of total assets, Off Balance Sheet (OBS) dividends, Capital to Asset Ratio (CAR). The results from both models were similar: evidence reveals that there is a positive relationship between size (total assets) and profitability. Meanwhile, OBS appears to have a positive relationship with profitability for UK but neutral or negative for other European countries. Moreover, results also state that CAR has a positive relationship with profitability. Furthermore, the paper touched on ownership type by indicating that there is high competition in banking due to the fact t hat there is foreign bank involvement in domestic banks, and that profitability is not linked to ownership (Goddard, Molyneux, and Wilson, 2004). Peters et al. (2004) studied the characteristics of banks in post-war Lebanon for the years 1993 to 2000 and compared the results to a group of banks from five other countries in the Middle East including UAE, KSA, Kuwait, Bahrain and Oman for the years 1995 through 1999. They used Return on Equity (ROE) measure profitability and leverage and they employed regression models that relate bank profitability ratios to various explanatory variables. This study tests the relationships between bank profitability and size, asset portfolio composition, off-balance sheet items, ownership by a foreign bank, and the ratio of employment to assets. The results show a strong association between economic growth and bank profitability, whether measured by ROE or ROA. They found that Lebanese banks are profitable, but not as profitable as a control group of banks from five other countries located in the Middle East. Islamic Banking In the area of Islamic Banking, Bashir (2000) assessed the performance of Islamic banks in eight Middle Eastern countries. He analyzed important bank characteristics that affect the performance of Islamic banks by controlling economic and financial structure measures. The paper studied fourteen Islamic banks from Bahrain, Egypt, Jordan, Kuwait, Qatar, Sudan, Turkey, and United Arab Emirates between 1993 and 1998. To examining profitability, the paper used Non Interest Margin (NIM), Before Tax Profit (BTP), Return on Assets (ROA), and Return on Equity (ROE) as performance indicators. There were also internal and external variables: internal variables were bank size, leverage, loans, short-term funding, overhead, and ownership; external variables included macroeconomic environment, regulation, and financial market. In general, results from the study confirm previous findings and show that Islamic banks profitability is positively related to equity and loans. Consequently, if loans and equity are high, Islamic banks should be more profitable. If leverage is high and loan to assets is also large, Islamic banks will be more profitable. The results also indicate that favorable macro-economic conditions help profitability (Bashir, 2000). Hassoune (2002) examined Islamic bank profitability in an interest rate cycle. In his paper, compared ROE and ROA Volatility for both Islamic and conventional banks in three GCC region, Kuwait, Saudi Arabia, and Qatar. He states that since Islamic banking is based on profit and loss sharing, managements have to generate sufficient returns for investors given that they are not willing accept no returns (Hassoune, 2002). Bashir and Hassan (2004) studied the determinants of Islamic banking profitability covers 43 Islamic Banks between 1994 and 2001 in 21 countries. Their figures show Islamic banks to have a better capital asset ratio compared to commercial banks which means that Islamic banks are well capitalized. Also, their paper used internal and external banks characteristics to determine profitability as well as economic measures, financial structure variables, and country variables. They used, Net-non Interest Margin (NIM), which is non interest income to the bank such as, bank fees, service charges and foreign exchange to identify profitability. Other profitability indicators adopted were Before Tax Profit divided by total assets (BTP/TA), Return on Assets (ROA), and Return on Equity (ROE). Results obtained by Bashir and Hassan (2004), were similar to the Bashir (2000) results, which found a positive relationship between capital and profitability but a negative relationship between loans and profitability. Bashir and Hassan also found total assets to have a negative relationship with profitability which amazingly means that smaller banks are more profitable. In addition, during an economic boom, banks profitability seems to improve because there are fewer nonperforming loans. Inflation, on the other hand, does not have any effect on Islamic bank profitability. Finally, results also indicate that overhead expenses for Islamic banks have a positive relation with profitability which means if expenses increase, profitability also increases (Bashir and Hassan, 2004). Alkassim (2005) examined the determinants of profitability in the banking sector of the GCC countries and found that asset have a negative impact on profitability of conventional banks but have a positive impact on profitability of Islamic banks. They also observed that positive impact on profitability for conventional but have a negative impact for Islamic banking. Liu and Hung (2006) examined the relationship between service quality and long-term profitability of Taiwanà ¢Ã¢â€š ¬Ã¢â€ž ¢s banks and found a positive link between branch number and long-term profitability and also proved that average salaries are detrimental to banksà ¢Ã¢â€š ¬Ã¢â€ž ¢ profit. Masood, Aktan and Chaudhary (2009) studied the co-integration and causal relationship between Return on Equity and Return on Assets for 12 banks in KSA for the period between 1999- 2007. For their research, the used time series model of ADF unit-root test, Johansen co-integration test, Granger causality test and graphical comparison model. They found that there are stable long run relationships between the two variables and that it is only a one-direction cause-effect relationship between ROE and ROA. The results show that ROE is a granger cause to ROA but ROA is not a granger cause to ROE that is ROE can affect ROA input but ROA does not affect the ROE in the Saudi Arabian Banking sector. Conceptual Framework Theoretical framework is a basic conceptual structure organized around a theory. It defines the kinds of variables that are going to be used in the analysis. In this research, the theoretical framework consists of seven independent variables that represent four aspects of the Bank Characteristics. Theses aspects are the Bank Size (Total Assets), Capital Structure (Equity and Tangible Equity), Liquidity (Loans and Liquid Assets) and Liabilities (Deposits and Overheads). Bank profitability is the dependent variable and two measures of bank profitability are used in this study, namely return on average equity (ROAE) and return on average assets (ROAA). Financial Crisis Internal Factors (Bank-Specific) Islamic Banking Profitability H1: Bank Size H2, H3: Capital Structure H4, H5: Liquidities H6, H7: Liabilities Return on Average Assets (ROAA) Return on Average Equity (ROAE) In this section we develop the hypothesis to be examined in this research paper. Development of Hypotheses This paper attempts to test seven hypotheses. A hypothesis is a claim or assumption about the value of a population parameter. It consists either of a suggested explanation for a phenomenon or of a reasoned proposal suggesting a possible correlation between multiple phenomena. According to Becker (1995), hypothesis testing is the process of judging which of two contradictory statements is correct. Hypothesis 1: Profitability has a positive and significant relationship with the total assets (ASSETS). Total Assets of a company represents its valuables including both tangible assets such as equipments and properties along with its intangible assets such as goodwill and patent. For banks, total assets include loans which are the basis for bank operations either through interest or interest-free practices. Total assets is used as a tool to measure the bank size; banks with higher total assets indicate bigger banks. Molyneux and el (2004) included total assets in their study and found a positive significant relationship between total assets and profitability. Therefore, total assets are expected to have positive relation with profitability which means that bigger banks are expected to be more profitable. Total assets are converted logarithmic to be more consistent with the other ratios Hypothesis 2: Profitability has a positive and significant relationship with equity to asset ratio (EQUITY). Total equity over total assets measures bankà ¢Ã¢â€š ¬Ã¢â€ž ¢s capital structure and adequate. It indicated bank ability to withstand losses and handle risk exposure with shareholders. Hassan and Bashir (2004) examined the relationship between EQUITY and bank profitability and found positive relationship. Therefore, EQUITY is included in this study and it is expected to have a positive relation with performance because well capitalized banks are less risky and more profitable (Bourke, 1989) Hypothesis 3: Profitability has a positive and significant relationship with Tangible Equity to total liabilities ratio (TNGEQTY). Tangible Equity represents the subset of shareholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s equity that is not common shares and not intangible asset. Tangible Equity became very popular after the financial crisis as a measure of bank viability since it indicates of how much ownership equity owners of common stock would receive in the event of a companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s liquidation. Beltratti and Stulz (2009) examined tangible equity to liabilities in their study to examine why some banks perform better during the financial crisis and found positive and insignificant relationship between TNEQTY and bank profitability. Therefore, TNEQTY is included in this study and it is expected to have positive relationship since banks with better capital structure in since of more equity à ¢Ã¢â€š ¬Ã¢â‚¬Å" seems to perform better. Hypothesis 4: Profitability has a positive and significant relationship with the loans to assets ratio (LOANS). Total loans over total assets a liquidity ratio used that indicates how much of bank assets are tied to loans. For banks, the higher LOANS ratio means less liquidity. Demirguc-Kunt and Huizinga, (1997) found positive relationship between LOANS and bank profitability. LOANS is included in this study and anticipated to have positive relationship with profitability. Furthermore, conventional banks rely on interest-based loans while Islamic banks rely on profit and loss sharing interest-free lending. Therefore, this ratio is also used to compare the performance of interest-based loans and interest-free lending. Hypothesis 5: Profitability has a positive and significant relationship with the liquid assets to total assets ratio (LIQUID). Liquid assets include currency, deposit accounts, and negotiable instruments that can be converted easily into cash. Liquid assets to total assets ratio is a liquidity ratio that measure how easily the banksà ¢Ã¢â€š ¬Ã¢â€ž ¢ assets can be converted into cash. Beltratti and Stulz (2009) found that LIQUID has positive and significant relation with profitability as banks with more liquid assets tend to perform better. Therefore, LIQUID is included in this study and expected to have positive relationship with profitability. Hypothesis 6: Profitability has a reverse and significant relationship with the deposits to assets ratio (DEPOSITS). Deposits to total ratio is another liquidity indicator but is considered a liability since they measure the impact of liabilities on profitability. Bashir and Hassan (2004) examined deposits in their study and found a negative relationship with profitability. Therefore, we expect that DEPOSITS to have negative relationship with profitability. Hypothesis 7: Profitability has a positive and significant relationship with the overhead to assets ratio (OVERHEAD). Overhead costs represent all bank expenses excluding interest expenses as they are considered as operations expenses. Overhead over total assets is a liability ratio that measures the operation efficiency of the bank. Alkassim (2005) included OVERHEAD in his research and found positive relationship to profitability. Therefore, OVERHEAD is included in this study and expected to have positive relationship to profitability. Chapter 3: Methods Data Sample From 2006 to 2008 2009 Country Islamic Banks Conventional Banks Islamic Banks Conventional Banks Bahrain 12 14 5 5 Saudi Arabia 2 9 1 7 Qatar 3 5 2 4 Kuwait 4 14 1 3 Oman 0 6 0 3 UAE 6 17 0 7 Total 27 65 9 29 The data used in this analysis were extracted from Bankscope data for all Islamic and Conventional Banks in the GCC for the period from 2006 to 2009. Using Bankscope has many advantages: it has information for over 30,000 banks, plus the accounting information is presented in a standardized format. Therefore, the accounting information of Islamic Banking is adjusted to be comparable with accounting information of conventional banks. The data used for this study are from a pooled time-series cross-sectional data. The data are taken from various countries. Sample period for this study is from 2002 to 2007. Cross-sectional data provide information on variables for a given period of time. While time series data give information about variables over a number of periods of time. The data for internal variables are obtained from BankScope database which is compiled by International Bank Credit Analysis Limited (IBCA). Using BankScope has two advantages. Firstly, it has information for 11,000 banks, accounting for about 90% of total assets in each country. Secondly, the accounting information at the bank level is presented in standardized formats, after adjustments for differences in accounting and reporting standards. The data for external variables are obtained from World Economic Outlook 2008 database, published by International Monetary Fund (IMF). A total of 60 Islamic banks from 18 countries were chosen in this study. The selected banks are those which are classified as Islamic bank in BankScope database. The Islamic banks have available data for at least one year between 2002 and 2007. This yielded an unbalanced panel data consisting of 260 observations. However, after eliminating cases with missing data, only 155 observations of balanced panel data are left. Variable Definition Independent Variable: Profitability Measures There are many ratios that have been used by researchers to measure bank profitability but the two most often used ratios are the return on assets (ROA) and the return on equity (ROE) (Iqbal et al., 2005). Return on Assets Impact of Internal Factors on Islamic Banking Impact of Internal Factors on Islamic Banking Introduction to the Subject Background of the Subject General Objective The purpose of this study is to examine how the internal factors of the Islamic Banking affected their performance before, during and after the financial crisis in the GCC in comparison to the conventional banking in the same area. Research Questions This study aims to answer the following questions: How did the financial crisis affect the profitability of Islamic Banks in comparison to Conventional Banks? What are the internal factors (bank specific characteristics) that influence the profitability of Islamic banking for every year from 2006 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 2009? Did these factors have the same impact on the profitability of Islamic Banking before, during and after the financial crisis? Did these internal factors influence the profitability of Islamic Banking in the same manner as of the Conventional Banking? Need for the Study Significance of the Study Assumptions of the Study Limitations of the Study Although we cannot neglect the importance of the external factors on the profitability of Islamic Banking, they were not included in this study. To understand the reason behind this decision, we need to go through the different types of external factors and how they are classified: Macroeconomic Factors Country Regulation Rules Bank Regulation Rules These factors were not included for the following reasons: Since we are examining the performance of 92 banks (27 Islamic Banks and 65 Conventional Banks) in 6 countries, the number of countries used in the study is not significant enough to study the impact of GDP and inflation accurately on Bank profitability especially when examining each year separately Country Regulation Rules as per the IMF Database, although it differs slightly for the selected countries, did not change over the period from 2006 to 2009. This means that for each bank, these factors remained constant. Data about Bank Regulation Rules could not be obtained for GCC banks Delimitation of the Study This study was delaminated to the Islamic and Conventional Banks in the GCC whose data could be obtained in the Bankscope database. Chapter 2: Literature Review Overview of Islamic Banking Islamic Baking has established as an alternative to conventional interest-based banking. The first stirring of the Islamic Banking movement began in 1963 by Dr. Ahmed Alnajar in a small town in Egypt, called Mit Ghamar. Dr. Alnajar completed his education in Germany and found that it had many saving banks operating on interest. He took the idea from a savings bank in Germany and created his own small Islamic bank that was interest free. After Dr. Alnajarà ¢Ã¢â€š ¬Ã¢â€ž ¢s small bank proved successful, the establishment of other Islamic banks followed. In 1971, the Nasser Social Bank was founded in Egypt with the objective of lending out money as a charity on the basis of a profit and loss sharing system and helping people in need. And in 1975, the idea of Islamic banking spread to other Islamic regions such Dubai Islamic bank in United Arab Emirates and The Islamic Development (IDB) Bank in Jeddah, Saudi Arabia (Wilson, 1990). Even though Islamic Banking has only been around for thirty years and is still in an evolving stage, Islamic Banking is the fastest growing segment of the credit markets in the Muslim countries. In 2009, Assets held by Islamic Banking banks rose by 28.6 percent to $822bn from $639bn in 2008, according to The Bankerà ¢Ã¢â€š ¬Ã¢â€ž ¢s à ¢Ã¢â€š ¬Ã…“Top 500 Islamic Financial Institutionsà ¢Ã¢â€š ¬? survey while conventional banks posted annual asset growth of just 6.8 percent. Furthermore, GCC states accounted for $353.2bn or 42.9 percent of the global aggregate, while Iran remained the largest single market for Shariah-compliant assets, accounting for 35.6 percent of the total. Source: Asian Banker Research, 2009 Finally, Islamic banking operations are not limited to Islamic countries but are spreading throughout the world. One reason is the growing trend toward transcending national boundaries, and unifying Muslims into a political and economic entity that could have a significant impact on the pattern of world trade (Abdel-Magid, 1981). Islamic Banking Rules and Principles Islamic banking rules are according to the Islamic Shariah derived from the Quran and prophet Mohamedà ¢Ã¢â€š ¬Ã¢â€ž ¢s sayings. The three main practices that are clearly prohibited in the Quran and the prophetà ¢Ã¢â€š ¬Ã¢â€ž ¢s sayings are, Riba (Interest), Gharar (Uncertainty), and Maysir (Betting). Prohibition of Riba or any predetermined or fixed rate in financial institutions is the most important factor in the Islamic principles pertaining to banking. As stated in the Quran à ¢Ã¢â€š ¬Ã…“Allah forbids ribaà ¢Ã¢â€š ¬?. Riba means an increase and under Shariah the term refers to the premium that must be paid by the borrower to the lender along with the principle amount as a condition for the loan (Omar and Abdel, 1996). Gharar occurs when the purchaser does not know what has been bought and the seller does not know what has been sold. In other words, trading should be clear by stating in a contract the existing actual object(s) to be sold, with a price and time to eliminate confusion and uncertainty between the buyers and the sellers. Maisir is considered in Islam as one form of injustice in the appropriation of othersà ¢Ã¢â€š ¬Ã¢â€ž ¢ wealth. The act of gambling, sometimes referred to betting on the occurrence of a future event, is prohibited and no reward accrues for the employment of spending of wealth that an individual may gain through means of gambling. Under this prohibition, any contract entered into, should be free from uncertainty, risk and speculation. Contracting parties should have perfect knowledge of the counter values intended to be exchanged as a result of their transactions. Therefore, and according to Ahmed and Hassan (2007), the principles of Islamic banking and finance enshrined from al-Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an and Prophet Mohamedà ¢Ã¢â€š ¬Ã‹Å"s Sayings can be summed up as follows: Any predetermined payment over and above the actual amount of principal is prohibited. The lender must share in the profits or losses arising out of the enterprise for which the money was lent. Making money from money is not acceptable in Islam. Gharar (deception) and Maisir (gambling) are also prohibited. Investments should only support practices or products that are not forbidden or even discouraged by Islam. Islamic Banking Products Islamic Banking products have to be done according to Islamic rules and principles, based on profit and loss sharing as well as avoiding interest. According to BNM statistics 2007, Al Bai Bithaman Ajil financing is the most common in Islamic Banking. There are a lot of Islamic Banking products; however there are some famous Islamic products that will be discussed in this section. Al Bai Bithaman Ajil /BBA This involves the credit sale of goods on a deferred payment basis. In BAA, the Islamic bank will purchase certain assets on a deferred payment basis and then sell the goods back to the customer at an agreed price including some margin or profit. The customer will make payment by installments over an agreed period. A fixed rate BBA is a powerful hedging tool against interest rates (Rosly, 1999). Murabahah Murabahah is a contract of sale. The Islamic Bank acts as a middle man and purchases the goods requested by the customer. The bank will later sell the goods to the customer in a sale and purchase agreement, whereby the lender re-sales to the borrower at a higher price agreed on by both parties. These are more for short term financing Mudharabah According to Kettel (2006), Mudharabah is a basic principle of profit and loss, where instead of lending money at a fixed rate return, the banker forms a partnership with the borrower, thereby sharing in a ventureà ¢Ã¢â€š ¬Ã¢â€ž ¢s profit and loss. Mudharabah is an agreement between the lender and entrepreneur, whereby the lender agrees to finance the project on a profit sharing basis according to a predetermined ratio agreed by both parties concerned. If there are any losses the lender will bear all the losses. Musharakah Musharakah means partnership whereby the Islamic institution provides the capital needed by the customer with the understanding that they both share the profit and loss according to a formula agreed before the business transaction is transacted. In Musharakah all partners are entitled to participate in the management of the investment but it is not compulsory. Musharakah can help in providing financing for large investments in modern economic activities Al Ijarah Ijarah means meaning to give something on a rental basis. In Ijarah, the bank acquires ownership based on the promise and leases back to the client for a given period. The customer pays the rental but the ownership still remains with the bank or lender. As the ownership remains with the lessor (bank), it continues to give the service for which it was rented. Under this contract, the lessor has the right to re-negotiate the quantum of the lease payment at every agreed interval to ensure rental remains in line with the market rates (Hume, 2004). Wadiah Wadiah is a trust contract and the bank provides gift (hibah) and various types of benefits to the customer. This is exactly like a normal conventional savings account. Istisna Istisna allows one party buys the goods and the other party undertakes to manufacture them according to agreed specifications. Normally, Istisna is used to finance construction and manufacturing projects. Salam Salam is defined as the forward purchase of specified goods with full forward payment. This contract is normally used for financing agricultural production. According to Hassan (2004), Salam based future contracts for agricultural commodities, supported by Islamic Banks, can help to overcome the agricultural financial problems Table 2.1 lists the products of conventional banking and their correspondent products in Islamic Banking. Deposit Services Current Deposit Wadiah Wad Dhamana / Qard Hasan Savings Deposit Wadiah Wad Dhamana / Mudaraba General Investment deposit Mudaraba Special Investment deposit Mudaraba Retail / Consumer Banking Housing Property Finance BBA / Ijara wa Iktina /Diminishing Musharaka Hire Purchase Ijara Thumma Al-Bai Share Financing BBA / Mudaraba / Musharaka Working Capital Financing Murabahah/ Bai Al-Einah/ Tawarruq Credit Card Bai Al-Einah/ Tawarruq Charge Card Qard Hasan Corporate Banking/ Trade Finance Project Financing Mudaraba / Musharaka / BBA / Istisna / Ijara Letter of Credit Musharaka/ Wakala/ Murabaha Venture Capital Diminishing Mudaraba/ Musharaka Financing Syndication Musharaka + Murabaha/ Istisna / Ijara Revolving Financing Bai Al-Einah Short-term Cash Advance Bai Al-Einah/ Tawarruq Working Capital Finance Murabaha/ Salam/ Istijrar Letter of Credit Murabaha Letter of Guarantee Kafala + Ujr Leasing Ijara Export/ Import Finance Musharaka/ Salam/ Murabaha Work-in-Progress, Construction Finance Istisna Bill Discounting Bai al-Dayn Underwriting, Advisory Services Ujr Treasury / Money Market Investment Products Sell buy-back agreements Bai al-Einah Islamic Bonds Mudaraba / Mushraka + BBA / Istisna / Ijara Government Investment Issues Qard Hasan/ Salam/ Mudaraba Other Products Services Stock-Broking Services Murabaha/ Wakala/ Joala Funds Transfer (Domestic Foreign) Wakala/ Joala Safe-Keeping Collection (Negotiable Instruments) Wakala/ Joala Factoring Wakala/ Joala/ Bai al-Dayn Administration of Property, Estates and Wills Wakala Hiring of Strong Boxes Amana/ Wakala Demand Draft, Travellerà ¢Ã¢â€š ¬Ã¢â€ž ¢s Cheques Ujr/ Joala ATM Service, Standing Instruction, Telebanking Ujr Source: Obaidullah, 2005 Financial Crisis and the Islamic Banking Previous Literature The study of bank profitability is an important tool to evaluate bank operation by examining the different factors affecting bank profitability and using these factors for management planning and strategic analysis. In the last four decades, many studies have been conducted to study both bank profitability and the determinants of bank profitability either for particular country or for a panel of countries. These studies normally divide these factors into internal factors and external factors. Internal factors represent the bank-specific characteristics such as bank size, liquidity structure; liabilitiesà ¢Ã¢â€š ¬Ã‚ ¦etc while external factors can be macroeconomic factors such as inflation and GDP growth or Country-specific regulations rules and practices. In the area of banking profitability, many studies have been conducted to investigate the profitability of conventional banks while only few were conducted in the field of Islamic banking. In this chapter, we will review these studies for conventional banking first and then will focus on studies in the Islamic banking field. Then we will cover the conceptual framework of this research. Conventional Banking Different studies have been conducted in the field of conventional banking profitability. Short (1979), Bourke (1989), Molyneux and Thornton (1992), Goddard, Molyneux, and Wilson (2004), Peters et al. (2004) are some of the researchers in the field. Short (1979) is one of the early scholars who studied the relationship between banking profit rates and concentration for sixty banks in Canada, Western Europe and Japan during the 1970à ¢Ã¢â€š ¬Ã¢â€ž ¢s and he included independent variables including government ownership and concentration by using H index to quantify concentration. Results showed that the government ownership impact on profitability varied throughout the countries studied but expressed an overall negative relationship. He also found evidence that indicated higher concentration rates lead to higher profit rates (Short, 1979). Bourke (1989) also compared concentration to bank profitability but included other determinants. Bourke (1989) covered ninety banks in Australia, Europe, and North America between 1972 and 198 and examined different internal and external factors: internal factors such as staff expenses, capital ratio, liquidity ratio, and loans to deposit ratio; external factors such as regulation, size of economies of scale, competition, concentration, growth in market, interest rate, government ownership, and market power. His results show that increase in government ownership leads to lower profitability in banking. He also found that concentration, interest rates, and money supply are positively related to profitability along with capital and reserves of total assets as well as cash and bank deposits of total assets. Bourke adds that well capitalized banks enjoy cheaper access to sources of funds as they are less risky than less capitalized banks (Bourke, 1989). Later, Molyneux and Thornton (1992) studied the determinants of European banks profitability. The paper examined eighteen counties in Europe between 1986 and 1989. This paper replicated Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s (1989) work by using internal and external determinants of bank profitability. However, Molyneux and Thornton (1992) results showed that government ownership expresses a positive coefficient with return on capital (profitability) which contradicts with Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s findings. Other results were similar to Bourkeà ¢Ã¢â€š ¬Ã¢â€ž ¢s, showing that concentration, interest rate, and money supply were positively related to bank profitability (Molyneux and Thornton, 1992). In one of the recent papers on bank profitability on European banks, Goddard, Molyneux, and Wilson (2004) shows similar findings to the paper by Molyneux and Thornton (1992). It investigates the determinants of profitability in six European countries and it covered 665 banks between 1992 and 1998. The study used cross-sectional and dynamic panel models. The variables used in the regression analysis were ROE, the logarithmic of total assets, Off Balance Sheet (OBS) dividends, Capital to Asset Ratio (CAR). The results from both models were similar: evidence reveals that there is a positive relationship between size (total assets) and profitability. Meanwhile, OBS appears to have a positive relationship with profitability for UK but neutral or negative for other European countries. Moreover, results also state that CAR has a positive relationship with profitability. Furthermore, the paper touched on ownership type by indicating that there is high competition in banking due to the fact t hat there is foreign bank involvement in domestic banks, and that profitability is not linked to ownership (Goddard, Molyneux, and Wilson, 2004). Peters et al. (2004) studied the characteristics of banks in post-war Lebanon for the years 1993 to 2000 and compared the results to a group of banks from five other countries in the Middle East including UAE, KSA, Kuwait, Bahrain and Oman for the years 1995 through 1999. They used Return on Equity (ROE) measure profitability and leverage and they employed regression models that relate bank profitability ratios to various explanatory variables. This study tests the relationships between bank profitability and size, asset portfolio composition, off-balance sheet items, ownership by a foreign bank, and the ratio of employment to assets. The results show a strong association between economic growth and bank profitability, whether measured by ROE or ROA. They found that Lebanese banks are profitable, but not as profitable as a control group of banks from five other countries located in the Middle East. Islamic Banking In the area of Islamic Banking, Bashir (2000) assessed the performance of Islamic banks in eight Middle Eastern countries. He analyzed important bank characteristics that affect the performance of Islamic banks by controlling economic and financial structure measures. The paper studied fourteen Islamic banks from Bahrain, Egypt, Jordan, Kuwait, Qatar, Sudan, Turkey, and United Arab Emirates between 1993 and 1998. To examining profitability, the paper used Non Interest Margin (NIM), Before Tax Profit (BTP), Return on Assets (ROA), and Return on Equity (ROE) as performance indicators. There were also internal and external variables: internal variables were bank size, leverage, loans, short-term funding, overhead, and ownership; external variables included macroeconomic environment, regulation, and financial market. In general, results from the study confirm previous findings and show that Islamic banks profitability is positively related to equity and loans. Consequently, if loans and equity are high, Islamic banks should be more profitable. If leverage is high and loan to assets is also large, Islamic banks will be more profitable. The results also indicate that favorable macro-economic conditions help profitability (Bashir, 2000). Hassoune (2002) examined Islamic bank profitability in an interest rate cycle. In his paper, compared ROE and ROA Volatility for both Islamic and conventional banks in three GCC region, Kuwait, Saudi Arabia, and Qatar. He states that since Islamic banking is based on profit and loss sharing, managements have to generate sufficient returns for investors given that they are not willing accept no returns (Hassoune, 2002). Bashir and Hassan (2004) studied the determinants of Islamic banking profitability covers 43 Islamic Banks between 1994 and 2001 in 21 countries. Their figures show Islamic banks to have a better capital asset ratio compared to commercial banks which means that Islamic banks are well capitalized. Also, their paper used internal and external banks characteristics to determine profitability as well as economic measures, financial structure variables, and country variables. They used, Net-non Interest Margin (NIM), which is non interest income to the bank such as, bank fees, service charges and foreign exchange to identify profitability. Other profitability indicators adopted were Before Tax Profit divided by total assets (BTP/TA), Return on Assets (ROA), and Return on Equity (ROE). Results obtained by Bashir and Hassan (2004), were similar to the Bashir (2000) results, which found a positive relationship between capital and profitability but a negative relationship between loans and profitability. Bashir and Hassan also found total assets to have a negative relationship with profitability which amazingly means that smaller banks are more profitable. In addition, during an economic boom, banks profitability seems to improve because there are fewer nonperforming loans. Inflation, on the other hand, does not have any effect on Islamic bank profitability. Finally, results also indicate that overhead expenses for Islamic banks have a positive relation with profitability which means if expenses increase, profitability also increases (Bashir and Hassan, 2004). Alkassim (2005) examined the determinants of profitability in the banking sector of the GCC countries and found that asset have a negative impact on profitability of conventional banks but have a positive impact on profitability of Islamic banks. They also observed that positive impact on profitability for conventional but have a negative impact for Islamic banking. Liu and Hung (2006) examined the relationship between service quality and long-term profitability of Taiwanà ¢Ã¢â€š ¬Ã¢â€ž ¢s banks and found a positive link between branch number and long-term profitability and also proved that average salaries are detrimental to banksà ¢Ã¢â€š ¬Ã¢â€ž ¢ profit. Masood, Aktan and Chaudhary (2009) studied the co-integration and causal relationship between Return on Equity and Return on Assets for 12 banks in KSA for the period between 1999- 2007. For their research, the used time series model of ADF unit-root test, Johansen co-integration test, Granger causality test and graphical comparison model. They found that there are stable long run relationships between the two variables and that it is only a one-direction cause-effect relationship between ROE and ROA. The results show that ROE is a granger cause to ROA but ROA is not a granger cause to ROE that is ROE can affect ROA input but ROA does not affect the ROE in the Saudi Arabian Banking sector. Conceptual Framework Theoretical framework is a basic conceptual structure organized around a theory. It defines the kinds of variables that are going to be used in the analysis. In this research, the theoretical framework consists of seven independent variables that represent four aspects of the Bank Characteristics. Theses aspects are the Bank Size (Total Assets), Capital Structure (Equity and Tangible Equity), Liquidity (Loans and Liquid Assets) and Liabilities (Deposits and Overheads). Bank profitability is the dependent variable and two measures of bank profitability are used in this study, namely return on average equity (ROAE) and return on average assets (ROAA). Financial Crisis Internal Factors (Bank-Specific) Islamic Banking Profitability H1: Bank Size H2, H3: Capital Structure H4, H5: Liquidities H6, H7: Liabilities Return on Average Assets (ROAA) Return on Average Equity (ROAE) In this section we develop the hypothesis to be examined in this research paper. Development of Hypotheses This paper attempts to test seven hypotheses. A hypothesis is a claim or assumption about the value of a population parameter. It consists either of a suggested explanation for a phenomenon or of a reasoned proposal suggesting a possible correlation between multiple phenomena. According to Becker (1995), hypothesis testing is the process of judging which of two contradictory statements is correct. Hypothesis 1: Profitability has a positive and significant relationship with the total assets (ASSETS). Total Assets of a company represents its valuables including both tangible assets such as equipments and properties along with its intangible assets such as goodwill and patent. For banks, total assets include loans which are the basis for bank operations either through interest or interest-free practices. Total assets is used as a tool to measure the bank size; banks with higher total assets indicate bigger banks. Molyneux and el (2004) included total assets in their study and found a positive significant relationship between total assets and profitability. Therefore, total assets are expected to have positive relation with profitability which means that bigger banks are expected to be more profitable. Total assets are converted logarithmic to be more consistent with the other ratios Hypothesis 2: Profitability has a positive and significant relationship with equity to asset ratio (EQUITY). Total equity over total assets measures bankà ¢Ã¢â€š ¬Ã¢â€ž ¢s capital structure and adequate. It indicated bank ability to withstand losses and handle risk exposure with shareholders. Hassan and Bashir (2004) examined the relationship between EQUITY and bank profitability and found positive relationship. Therefore, EQUITY is included in this study and it is expected to have a positive relation with performance because well capitalized banks are less risky and more profitable (Bourke, 1989) Hypothesis 3: Profitability has a positive and significant relationship with Tangible Equity to total liabilities ratio (TNGEQTY). Tangible Equity represents the subset of shareholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s equity that is not common shares and not intangible asset. Tangible Equity became very popular after the financial crisis as a measure of bank viability since it indicates of how much ownership equity owners of common stock would receive in the event of a companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s liquidation. Beltratti and Stulz (2009) examined tangible equity to liabilities in their study to examine why some banks perform better during the financial crisis and found positive and insignificant relationship between TNEQTY and bank profitability. Therefore, TNEQTY is included in this study and it is expected to have positive relationship since banks with better capital structure in since of more equity à ¢Ã¢â€š ¬Ã¢â‚¬Å" seems to perform better. Hypothesis 4: Profitability has a positive and significant relationship with the loans to assets ratio (LOANS). Total loans over total assets a liquidity ratio used that indicates how much of bank assets are tied to loans. For banks, the higher LOANS ratio means less liquidity. Demirguc-Kunt and Huizinga, (1997) found positive relationship between LOANS and bank profitability. LOANS is included in this study and anticipated to have positive relationship with profitability. Furthermore, conventional banks rely on interest-based loans while Islamic banks rely on profit and loss sharing interest-free lending. Therefore, this ratio is also used to compare the performance of interest-based loans and interest-free lending. Hypothesis 5: Profitability has a positive and significant relationship with the liquid assets to total assets ratio (LIQUID). Liquid assets include currency, deposit accounts, and negotiable instruments that can be converted easily into cash. Liquid assets to total assets ratio is a liquidity ratio that measure how easily the banksà ¢Ã¢â€š ¬Ã¢â€ž ¢ assets can be converted into cash. Beltratti and Stulz (2009) found that LIQUID has positive and significant relation with profitability as banks with more liquid assets tend to perform better. Therefore, LIQUID is included in this study and expected to have positive relationship with profitability. Hypothesis 6: Profitability has a reverse and significant relationship with the deposits to assets ratio (DEPOSITS). Deposits to total ratio is another liquidity indicator but is considered a liability since they measure the impact of liabilities on profitability. Bashir and Hassan (2004) examined deposits in their study and found a negative relationship with profitability. Therefore, we expect that DEPOSITS to have negative relationship with profitability. Hypothesis 7: Profitability has a positive and significant relationship with the overhead to assets ratio (OVERHEAD). Overhead costs represent all bank expenses excluding interest expenses as they are considered as operations expenses. Overhead over total assets is a liability ratio that measures the operation efficiency of the bank. Alkassim (2005) included OVERHEAD in his research and found positive relationship to profitability. Therefore, OVERHEAD is included in this study and expected to have positive relationship to profitability. Chapter 3: Methods Data Sample From 2006 to 2008 2009 Country Islamic Banks Conventional Banks Islamic Banks Conventional Banks Bahrain 12 14 5 5 Saudi Arabia 2 9 1 7 Qatar 3 5 2 4 Kuwait 4 14 1 3 Oman 0 6 0 3 UAE 6 17 0 7 Total 27 65 9 29 The data used in this analysis were extracted from Bankscope data for all Islamic and Conventional Banks in the GCC for the period from 2006 to 2009. Using Bankscope has many advantages: it has information for over 30,000 banks, plus the accounting information is presented in a standardized format. Therefore, the accounting information of Islamic Banking is adjusted to be comparable with accounting information of conventional banks. The data used for this study are from a pooled time-series cross-sectional data. The data are taken from various countries. Sample period for this study is from 2002 to 2007. Cross-sectional data provide information on variables for a given period of time. While time series data give information about variables over a number of periods of time. The data for internal variables are obtained from BankScope database which is compiled by International Bank Credit Analysis Limited (IBCA). Using BankScope has two advantages. Firstly, it has information for 11,000 banks, accounting for about 90% of total assets in each country. Secondly, the accounting information at the bank level is presented in standardized formats, after adjustments for differences in accounting and reporting standards. The data for external variables are obtained from World Economic Outlook 2008 database, published by International Monetary Fund (IMF). A total of 60 Islamic banks from 18 countries were chosen in this study. The selected banks are those which are classified as Islamic bank in BankScope database. The Islamic banks have available data for at least one year between 2002 and 2007. This yielded an unbalanced panel data consisting of 260 observations. However, after eliminating cases with missing data, only 155 observations of balanced panel data are left. Variable Definition Independent Variable: Profitability Measures There are many ratios that have been used by researchers to measure bank profitability but the two most often used ratios are the return on assets (ROA) and the return on equity (ROE) (Iqbal et al., 2005). Return on Assets