**4.7 External factors analysis**

The researcher used three economic factors as explanatory variables of Z score in Islamic banks, including gross domestic Product Growth rate (GDP), Inflation rate, and exchange rate in Dollar. **Table 29** indicates that exchange rate causes69% of changes in Z score, **Table 30** shows significance of the model, The result of **Table 31** shows that exchange rate affect negatively on Z score in Islamic banks at

Earning Dimension ratios, but **Table 25** shows significance of individual variable, it indicate that only Earnings Per share (EPS) as Earning indicator affects positively and significantly on Z score. However EPS did not use previously as Earning indicator in reviewed studies. The results of **Tables 23** and **25** show that only Earning per share can affect negatively on Z score at 1% level, however there is no signifi-

**Model Sum of Squares df Mean Square F Sig.** 1 Regression 451.655 3 150.552 3.526 .020<sup>b</sup>

**Model R R Square Adjusted R Square Std. Error of the Estimate**

1 .372<sup>a</sup> .138 .099 6.53448

Residual 2818.162 66 42.699

*Predictors: (Constant), Earning Per Share in dollar, Return on Assets, Return on Equity*

Total 3269.817 69

*Model summary between Z score and Earning Dimension ratios.*

*ANOVA<sup>a</sup> test between Z score and Earning Dimension ratios.*

*Table 24 shows significant of the model between Z score and Earning Dimension ratios. <sup>a</sup>*

*Predictors: (Constant), Earning Per Share in dollar, Return on Assets, Return on Equity*

**Model Beta In t Sig. Partial**

*Linear and Non-Linear Financial Econometrics - Theory and Practice*

Liquid Assets/Total Deposits .119<sup>c</sup> 1.730 .088 .205 .585

*Excluded Variablesa,b from the model between Z score and Liquidity dimension in camel model.*

**Model Variables Entered<sup>a</sup> Variables**

1 Earnings Per Share in dollar, Return on Assets, Return on Equity<sup>b</sup>

1 liquid assets / current liabilities

*Source the researcher from data analysis.*

*Linear Regression through the Origin*

*Source the researcher from data analysis.*

*Source the researcher from data analysis.*

*Dependent Variable: Z Score*

*Variables entered/Removed.*

*All requested variables entered.*

*Predictors in the Model: Net Loan/Total Assets*

*Dependent Variable: Z Score*

*a*

*b*

*c*

*a*

*b*

*a*

**Table 23.**

**Table 22.**

**Table 21.**

**Correlation**

.012<sup>c</sup> .193 .848 .023 .798

**Collinearity Statistics Tolerance**

**Removed**

**Method**

. Enter

cant effect of ROE&ROA on Z score.

*Source the researcher from data analysis.*

*Dependent Variable: Z Score*

*b*

**316**

**Table 24.**


#### **Table 28.**

*Coefficientsa,b of the test between Z score and Sensitivity Dimension.*


**5. Conclusion**

*a*

*b*

**Table 32.** *Excluded variables.*

**5.1 Results assessment**

of the bank.

price).

**319**

Merchant, [1], Zeitun [2].

adequacy in Camel rating system.

**Model Beta**

*DOI: http://dx.doi.org/10.5772/intechopen.95028*

Gross Domestic Product annual Rate (%)

*Source: the researcher from data analysis.*

*Dependent Variable: Z Score*

*Table 32 shows excluded external economic variables from Z score model.*

*Predictors in the Model: (Constant), exchange rate in Dollar*

1.T. equities to T. Asset ratio affects positively with significance level 0.03 on Z

3. Islamic finance portfolio (T. loan) to Total Assets interprets 88% of changes in

4.Provision of non-performing loan to net loans ratio does not effect on Z score

5.Non-Performing Loan to Total Loan ratio does not effect on Z score of the bank.

6.Provision of non-performing loan to net loans and Non-Performing Loan toT. Loan ratios are highly correlated, so these ratios can be used as indicators of credit risk in Islamic banks. But they did not affect significantly on Z score.

7.There are some ratios commonly used in Camel rating system as indicators of management Quality, but they are not Effect on Z score of Islamic banks, those are include cost to income, Return on Equities, Finance Cost to Total Assets, this result is contradicted to the results of Ahsan Mohammad, 2014,

8.Market share price represents 28% of changes in Z score in Islamic banks with significant level = 0.0001 with the model (Z score = 1.36 + 1.05 share market

9.Net Loan to Total Assets represent 89% of changes in Z score of Islamic banks,

it affect positively by 12.499 times at significance level = 0.0001.

Z score with positive causal relation at significance level = 0.00001.

2.The best ratio that can measure Capital Adequacy is debit to assets ratio, because it interprets 8.9 of changes in Z score with significance level 0.0001 as compare to Equities to T. Assets ratio which represents 6.6 of changes in Z score of the Islamic banks. so that it can be used as indicator of Capital

score for Islamic banks,it represent 6.6 of changes in Z score.

**In**

*Determinants of Islamic Banks Distress in Gulf Council Countries (GCC)*

1 Inflation rate (%) .054<sup>b</sup> .617 .539 .075 1.000

**t Sig. Partial**

**Correlation**


**Collinearity Statistics Tolerance**

#### **Table 29.**

*Model summary between Z score and economic factors.*


*b Predictors: (Constant), exchange rate in Dollar*

#### **Table 30.**

*ANOVA<sup>a</sup> test between Z score and economic factors.*


*a Dependent Variable: Z Score.*

#### **Table 31.**

*Coefficients<sup>a</sup> significance of the model between Z score and exchange rate.*

significance level .1%, **Table 32** shows excluded variables (GDP & inflation rate) from the model. According to **Table 32** the study can demonstrate there is no causal relation between that inflation rate, GDP and Z score. This result go in contrast with Zeitun [2] he stated that GDP was found to be positively related to banks performance, while inflation negatively related to the banks performance.

*Determinants of Islamic Banks Distress in Gulf Council Countries (GCC) DOI: http://dx.doi.org/10.5772/intechopen.95028*


*Table 32 shows excluded external economic variables from Z score model.*

*Source: the researcher from data analysis.*

*a Dependent Variable: Z Score*

*b Predictors in the Model: (Constant), exchange rate in Dollar*

**Table 32.** *Excluded variables.*
