Cross-Country Nonparametric Analysis of Bahrains Banking System

Grigorian, David; Manole, Vlad

doi:10.2478/auseb-2014-0002

Cited by 7 publications

(8 citation statements)

References 24 publications

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“…Some studies (two of which are in the GCC context) find that Islamic banks are significantly less efficient than conventional ones (Mokhtar et al 2007;Srairi 2010;Kamarudin et al 2014;Mobarek and Kalonov 2014), while other studies (two of which are in the GCC context) suggest that Islamic banks are significantly more efficient than conventional banks (Al-Jarrah and Molyneux 2006;Al-Muharrami 2008;Olson and Zoubi 2008). The vast majority of frontier studies, however, find no significant difference between the two bank types (El-Gamal and Inanoglu 2005;Grigorian and Manole 2005;Mokhtar et al 2006;Bader 2008;Mohamad et al 2008;Hassan et al 2009), or else the significance of the difference between the two bank systems is not tested (Hussein 2004;Al-Jarrah and Molyneux 2005;Ahmad and Luo 2010;Said 2012). However, caution is needed regarding some studies where either the sample size -particularly the number of Islamic banks -is small or a variety of countries with markedly economies has been utilised; thus, making the isolation of an "Islamic banking" effect difficult.…”

Section: Literature Reviewmentioning

confidence: 99%

Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis

et al. 2019

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We assess the performance and productivity of Islamic and conventional banks using financial ratios, a two-and a four-component meta-frontier Malmquist productivity index (MPI). We focus on the relatively homogenous GCC region over the 2006-2012 period that covers the global financial crisis. We find that Islamic banks exhibit worse cost and profit performance but are on a par with regards to revenue performance compared to the conventional ones. The components of the meta-frontier MPI suggest that the technology of conventional banks improves markedly in years leading to the financial crisis and declines thereafter. Islamic banks show a similar but more muted pattern. By contrast, the pronounced within-Islamic bank group variation in technical efficiency and technology suggest that Islamic banks are quite heterogeneous as a group. Overall, the MPI analysis suggests that the two bank types are more aligned following the global financial crisis. Policy implications are subsequently discussed.

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Section: Literature Reviewmentioning

confidence: 99%

Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis

et al. 2019

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“…Cross-country, panel studies show that for the Middle East and North Africa region (MENA) financial development varies across the region with notable variations among banking sectors and regulatory and supervisory regimes (Creane et al, 2004). Grigorian and Manole (2005), provide evidence of competitiveness in terms of scale efficiency in a comparative study between Singaporean and Bahrain banks yet they observe that Arab banks still lagged behind their 'westernised' counterprarts. Ariss et al (2007) studied 45 banks operating in the six GCC countries (for 1999-2004) and found an average overall efficiency score of about 78% for all banks in GCC countries noting also a decline in the overall efficiency index for the same period.…”

Section: Pre-crisis Studies Literaturementioning

confidence: 98%

A meta-crisis banking efficiency study in the MENA region

Anagnostopoulos

Noikokyris

Giannopoulos

2020

JIABR

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Purpose The purpose of this paper is to comparatively examine the cost and the overlooked revenue efficiency of Islamic and commercial banks in the aftermath of the crisis, operating in nine MENA-based countries during the 2010-2017 financial period, where the established empirical work is relatively limited. The authors also update the research where they use recent data sets and they provide for a targeted, structured literature review pre- and post-crisis in the Gulf region. Design/methodology/approach The authors examine cost and revenue efficiency of 25 major Islamic banks (IBs) and 25 major conventional banks (CBs). They conduct tests on the determinants of such variables. In the first stage of the analysis, they measure efficiency by using the data envelopment analysis (DEA) technique. The analysis performs regressions where these also reveal that the bank efficiency index is influenced by various bank type-specific attributes. It also seems that tighter restrictions on bank activities are negatively associated with bank efficiency. Second stage analysis, which accounts for banking environment and bank-level characteristics, confirms these results. Findings Conventional banks are both more cost and revenue efficient than Islamic banks over the period under examination. The analysis also reveals that the bank efficiency index is influenced by bank-type attributes. Greater presence of fixed capital resources has positive effects on growth in both Islamic and conventional banking. The major constraints impeding Islamic banking growth include labour costs. The authors examine whether and how bank-type orientation affects the cost and revenue efficiency of conventional and Islamic banks. They find that post-crisis Islamic banks underperform their conventional counterparts on both accounts within a mixed banking system. Research limitations/implications This study did not include comparative data before the 2008 financial crisis. There is also a great deal of heterogeneity among Islamic banks in the samples that have been examined here and by other researchers and the constructed efficiency scores should be interpreted cautiously as divergent Islamic banks are pooled in the same samples. Practical implications This study identified factors that may help bank managers to improve their financial outlook by controlling revenue and cost efficiency profitability. These factors could as well help to understand how some indicators affect both cost and revenue efficiency, particularly in Islamic banking. It also seems that tighter restrictions on Islamic bank activities are negatively associated with bank efficiency. Islamic banks that directly compete with their conventional counterparts in the aftermath of the crisis are less efficient on both the cost and revenue frontiers. They are potentially hindered by the differential regulations of supervising authorities in dual banking systems. Social implications The authors provide recommendations regarding regulatory and other issues that are relevant to Islamic banking and further research is suggested. Findings are relevant to a variety of stakeholders (managers, policymakers and regulators). Islamic banking authorities could re-examine the benefits of partially moving to a more standardized/conventional system of banking by lifting some trading restrictions. In addition, developing and maintaining managerial skills is an indispensable instrument for the long-term endurance of any system. A related aspect is thus an effort to determine the holistic efficiency (including managerial) of Islamic banks as a guide for policymakers to improve managerial performance. Originality/value There is relatively limited empirical work that investigates the efficiency between Islamic and conventional banking in the aftermath of the crisis in the Gulf region despite the growing importance of this region on political and economic levels. The authors also examine the revenue efficiency measure often under-researched in the literature and particularly important for comparative studies. Overseas-owned banks have attained much higher infiltration levels in middle-eastern countries over the past decade. It has also been suggested that market penetration differences may also be related to bank efficiency concerns among countries and their financial systems as opposed to types of banks.

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“…Several studies such as Sufian et al (2013), Bader et al (2008), Grigorian and Manole (2005), Sufian et al (2008), Siddiqui (2012), Zeitun and Benjelloun (2013), Limam (2001), Ariss et al (2007) and Ramanathan (2007) have all utilized DEA method to study about the banking sector in various contexts.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Similarly, Qatar Islamic banks are ranked the most efficient banks in the Islamic banking industry globally (Perumal, 2015). In spite of the above growth and prospects, the literature (Ariss et al , 2007; Ramanathan, 2007; Grigorian and Manole, 2005; Limam, 2001) suggest low performance among banks in Qatar. However, to the best of the authors’ knowledge, no study has offered a conclusive evidence with regards to this contradiction.…”

Section: Introductionmentioning

confidence: 99%

Efficiency of Qatari banking industry: an empirical investigation

Abdul-Wahab

Haron

2017

IJBM

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Purpose The purpose of this paper is to examine the efficiency of the banking sector in Qatar. The paper utilizes 15 banks comprising Islamic, conventional and foreign banks for the duration of 2007 to 2011. Design/methodology/approach Data envelopment analysis (DEA) technique is applied to compute technical efficiency, pure technical efficiency and scale efficiency. Also, Malmquist productivity index (MPI) is used to identify the sources of productive efficiencies of the banks. Findings The results suggest that Qatari banks are operating below optimum performance and thus there is still room for improvement. While conventional banks are the most efficient in Qatar in terms of technical and pure technical efficiencies, Islamic banks are most efficient in terms of scale efficiency. Besides, pure technical inefficiency dominated scale inefficiency in the Qatari banking sector. Moreover, as compared to the Islamic banks, conventional and foreign banks recorded a reduction in average technical efficiency during the duration of the 2008/2009 global financial crisis. In terms of productivity progress, all the Qatari banks were experiencing a decline in productivity mainly attributed to less technological innovation in the banking sector of Qatar. Research limitations/implications Most of the banks in Qatar do not have published data before 2007 and after 2011. Practical implications There is less technological innovation in the banking sector of Qatar. Hence, bank managers in Qatar should focus on educating customers about modern banking technologies and other innovative banking services in Qatar. Originality/value This study is a pioneering effort in the application of DEA and MPI to study about the banking sector in Qatar.

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Cross-Country Nonparametric Analysis of Bahrains Banking System

Cited by 7 publications

References 24 publications

Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis

Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis

A meta-crisis banking efficiency study in the MENA region

Efficiency of Qatari banking industry: an empirical investigation

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