A value-based measure of market power for the participatory deposits of Islamic banks

Kenneth Baldwin, Maryam Alhalboni

Research output: Contribution to journalArticlepeer-review


Traditional earnings-based measures of market power cannot be applied to Islamic banks since depositors are investors and not creditors. We develop a new market power measure based on the capitalized value of a bank’s deposit funds’ management fees in which more powerful banks price deposits to create greater long-term value, whilst less powerful banks target short-term earnings or risk management goals. Applying panel VAR and two-step system GMM to international data from 1990-2022, we validate the measure by showing that deposit growth rates (Granger) cause market power and are the only significant determinant across all two-step system GMM model and sub-sample variants.
Original languageEnglish
Article number101809
Number of pages23
JournalJournal of International Financial Markets, Institutions and Money
Early online date8 Aug 2023
Publication statusPublished - 1 Sept 2023

Bibliographical note

© 2023 The Author(s)


  • Market Power
  • Value-Based Measure
  • Deposits
  • Islamic Banking
  • Optimal Profit-Sharing Ratio

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