Bankruptcy and Sustainability A Conceptual Review on Islamic Banking Industry

The purpose of this paper is to access the sustainability profile of Islamic banking industry and to proposed methods for achieving it. The approach used in this study is to first select an appropriate bankruptcy evaluation model for Islamic banking industry, while bankruptcy is being used as a proxy for measuring economic sustainability. ANOVA and Regression tests are proposed to examine the significance and correlations of independent variables with bankruptcy/sustainability of Islamic banking industry. This paper identified the significance of achieving strong sustainability of banking industry and linked banking activities with the success of financial system and vice versa. It highlighted some of the earlier bankruptcy evaluation models and also proposed proxies for measuring economic sustainability. The bankruptcy literature suggested that, Altman model for service firms is the most appropriate model for evaluating economic sustainability of Islamic banking industry. This study illuminated the importance and consequences of comparative bankruptcy study and also the importance of identifying the key performance indicators that effects the sustainability profile of Islamic banking industry.