Journal article
From collapse to contagion: The Silicon Valley Bank (SVB) default and its ripple effects across global islamic and conventional financial sectors
Research in international business and finance, v 81, 103142
Jan 2026
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This study quantifies the cumulative abnormal returns (CARs) and abnormal returns (ARs) of the global Sharia and non-Sharia-compliant sectors surrounding the Silicon Valley Bank (SVB) collapse. We integrate daily global financial stress indices (FSI), geopolitical risk (GPR), and the oil price volatility index (OVZ) into an OLS regression to control for global uncertainties. We estimate the SVB implosion’s moderating effects on the global Islamic and non-Islamic cross-sectoral conditional connectedness between the Sharia and non-Sharia-compliant returns. The findings show that non-Sharia-compliant sectors—energy, industrials, and materials—incurred smaller cumulative abnormal losses than their Sharia-compliant counterparts. However, the global non-Sharia-compliant financial sector was more negatively affected by the SVB implosion. The SVB implosion positively moderates the dynamic conditional connectedness between the Islamic and non-Islamic sectors. However, cross-market correlations diminished for specific Islamic-non-Islamic sectoral stock pairs during the event date and the subsequent adjustment phase, indicating enhanced opportunities for risk mitigation and portfolio diversification. Using the DCC-GARCH-t copula method to formulate a hedge ratio strategy reveals that, during prolonged volatility in most non-Sharia-compliant industries, the most cost-effective risk mitigation is a short position in the Sharia-compliant Energy sector.
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•This study analyzes the event of the Silicon Valley bank (SVB) implosion using the cumulative abnormal returns (CARs) as well as the abnormal returns (ARs).•We estimate the impact of SVB, FSI, GPR and OVZ on the Islamic and non-Islamic inter-sectoral connectedness.•The SVB implosion positively moderates the connectedness between Islamic and non-Islamic sectors.•The hedge ratio strategy reveals that to manage extended periods of volatility within the majority of non-sharia compliant sectors.
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Details
- Title
- From collapse to contagion: The Silicon Valley Bank (SVB) default and its ripple effects across global islamic and conventional financial sectors
- Creators
- Mosab I. Tabash - Al Ain UniversityUmaid A. Sheikh - University of Central PunjabHammoudeh Shawkat - Drexel University, Economics (School of Economics)Kang Sang Hoon - Pusan National University
- Publication Details
- Research in international business and finance, v 81, 103142
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:001595173000001
- Scopus ID
- 2-s2.0-105030613774
- Other Identifier
- 991022197017704721
UN Sustainable Development Goals (SDGs)
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance