This paper explores liquidity effects following the merger and acquisition between Al Salam Bank Bahrain and a conventional bank post the financial crises. We find evidence of a sustained increase in the liquidity of the stocks as a result of the change from conventional to Islamic banking. The empirical findings are consistent with the information cost/liquidity hypothesis, which states that investors demand a lower premium for holding stocks with relatively more available information. Our results suggest that Islamic banking stimulates trading and growth of the financial sector following financial turmoil.
|Journal||Journal of International Financial Markets, Institutions and Money|
|Early online date||11 Mar 2016|
|Publication status||Published - May 2016|
- Islamic banking
- Financial crises
- Mergers and acquisitions