Cost and profit efficiency of conventional and Islamic banks in GCC countries

Srairi, Samir

doi:10.1007/s11123-009-0161-7

Cited by 251 publications

(277 citation statements)

References 58 publications

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“…Therefore, it seems that Islamic banks in the region MENA and Southeast Asia are more efficient in the generation of profits rather than in control of costs. Our results corroborate those of previous studies (Kabir, 2006;Ben Khediri and Ben-Khedhiri, 2009;Srairi, 2010 Hence, during the 7 years of our study, the level of cost efficiency scores increases by 1% and the profit efficiency increases by 5%. In fact, cost efficiency has reached its max (at the beginning of the crisis) in the year 2007 with a level (82.91%) higher than the average score.…”

Section: 21-the Estimation Of the Results Of Cost And Profit Frontiersupporting

confidence: 93%

“…In accordance with recent developments in literature (Fries and Taci 2005;Pereraet al 2007;Mamatzakiset al 2008;Srairi, 2010) and in order to capture the heterogeneity among countries, the cost in this study function is extended to adapt to country-specific variables:…”

Section: 1-efficiency Scoresmentioning

confidence: 99%

“…In addition it includes as a special case the Cobb-Douglas (Carvalo and Kasman, 2005) However, most of the parametric models applied to financial institutions were interested in the study of the cost efficiency. Thus, we could pick up these last years a certain resurgence of interest for efficiency advantage (Isik and Hassan, 2002;Al-Jarrah and Molyneux, 2003;Mohamed and Molyneux, 2003;Srairi, 2010). This concept requires that the Manager should not only pay attention to the reduction of the marginal dollar of costs, but also to the increase in the marginal dollar of revenue.…”

Section: 1-efficiency Scoresmentioning

confidence: 99%

“…Using panel data modeling, we test the internal factors to the Bank usually used in the analysis of the determinants of the efficiency of financial institutions: the size of the Bank, the capital adequacy ratio, profitability, credit, risk, and operational costs. For each determinant we have, a hypothesis taking into account results of previous studies Hypothesis 1: Referring to the work of Haron (2004) and Srairi (2010) on Islamic banks and Papadopoulas (2004) and Pasiouras (2007) on conventional banks, we assume that banks with a high total asset are more efficient in terms of cost and profit before and during the financial crisis and less efficient after the crisis in terms of cost and profit.…”

Section: 2-hypothesis: Bank's Efficiency Determinantmentioning

confidence: 99%

“…We use the same measures as in previous studies (Fries and Taci, 2005;Carvalo and Kasman, 2005;Pareraet al, 2007;Srairi, 2010):…”

Section: 2-macroeconomic Variablesmentioning

confidence: 99%

See 4 more Smart Citations

The Determinants of Cost/Profit Efficiency of Islamic Banks Before, During and After the Subprime Crisis Using SFA Approach

Mghaieth

Khanchel

2015

ijafr

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In this paper we estimate the determinants of cost and profit efficiency of Islamic banks using the stochastic frontier approach SFA. We use 62 Islamic banks in sixteen countries of the MENA and South-East Asia regions during the period [2004][2005][2006][2007][2008][2009][2010]. We compare the efficiency between Islamic banks during the subprime crisis phases. Moreover, we examine the variables specific to the banks which can explain the sources of inefficiency and those let us decline the scores of cost and profit efficiency on a specific number of variables (total assets, capital adequacy, profitability, credit risk, operational costs). Results reveal that, Islamic banks in our study are more efficient in the generation of the profits rather than in the control of the costs. Thus, only the total assets and the operational costs represent the determinants of cost efficiency of the Islamic banks. Finally, for the profit efficiency our results indicate that the Islamic banks with high equities and high ratio of profitability are efficient in terms of profit.

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Section: 21-the Estimation Of the Results Of Cost And Profit Frontiersupporting

confidence: 93%

Section: 1-efficiency Scoresmentioning

confidence: 99%

Section: 1-efficiency Scoresmentioning

confidence: 99%

Section: 2-hypothesis: Bank's Efficiency Determinantmentioning

confidence: 99%

“…We use the same measures as in previous studies (Fries and Taci, 2005;Carvalo and Kasman, 2005;Pareraet al, 2007;Srairi, 2010):…”

Section: 2-macroeconomic Variablesmentioning

confidence: 99%

See 3 more Smart Citations

The Determinants of Cost/Profit Efficiency of Islamic Banks Before, During and After the Subprime Crisis Using SFA Approach

Mghaieth

Khanchel

2015

ijafr

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Deconstructing three‐stage overall efficiency into input, output and stability efficiency components with consideration of market power and loan loss provision: An application to Chinese banks

Fukuyama

Tan

2020

Int. J Fin Econ

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The current study proposes a new three-stage network data envelopment analysis (DEA) model to estimate three different types of efficiencies. More specifically, the input efficiency is estimated in the first stage, followed by the evaluation of stability efficiency in the second stage, and finally, the output efficiency is derived from the final stage. In particular, we consider market power in deposits and market power in loans in the banking production process. Rather than using non-performing loans as an undesirable output, this paper innovatively uses loan loss provisions in bank production. We argue that the loan loss provisions are helpful to improve bank stability because they provide a cushion to absorb unexpected losses, therefore we treat it as a good intermediate output in the second stage and a good intermediate input in the third stage. The results exhibit that the scores of stability inefficiency are the highest, followed by output inefficiency, while Chinese commercial banks have the lowest level of input inefficiency. Not only did we observe that the Chinese banking industry has the highest level of stability inefficiency, but we also noticed that the stability inefficiency had the strongest volatility during 2007-2017. We also explore the impact of non-performing loan ratios from three different geographical areas on bank efficiency in China in a secondphase regression analysis, the results of which show that the input inefficiency results from higher levels of financial risk from the central area in China, while the western area in China has the opposite sign.

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The impact of external governance and regulatory settings on the profitability of Islamic banks: Evidence from Arab markets

Athari

Bahreini

2021

Int. J Fin Econ

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This study specifically investigates the effects of external governance mechanisms and regulatory settings on the profitability of Islamic banks operating in the Arab markets from 2003 to 2017. The empirical results underscore that the external governance mechanism and its dimensions in particular the political stability, regulatory quality, rule of law, and control of corruption impact Islamic banks' profitability positively. However, the regulatory settings and its sub-indices particularly the extent of disclosure and ease of shareholder suits have the opposite effect. Likewise, the results of traditional determinants indicate that the profitability of Islamic banks is shaped by the bank-specific, industry-specific, and country and global-level determinants. Results are robust and consistent with alternative estimation procedures and also support for the negative and positive effect of voice and accountability external governance's dimension and inflation, respectively. The findings of this study have important policy implications for regulators, policymakers, and banks' managers.

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Cost and profit efficiency of conventional and Islamic banks in GCC countries

Abstract: Banking, Cost efficiency, Profit efficiency, Islamic banks, Stochastic frontier approach, GCC countries, C30, G21,

Cited by 251 publications

References 58 publications

The Determinants of Cost/Profit Efficiency of Islamic Banks Before, During and After the Subprime Crisis Using SFA Approach

The Determinants of Cost/Profit Efficiency of Islamic Banks Before, During and After the Subprime Crisis Using SFA Approach

Deconstructing three‐stage overall efficiency into input, output and stability efficiency components with consideration of market power and loan loss provision: An application to Chinese banks

The impact of external governance and regulatory settings on the profitability of Islamic banks: Evidence from Arab markets

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