The Performance of Saudi Banking Industry 2000 -2011: Have the Banks Distinguished Themselves from One Another?

Abstract

This paper studies the technical efficiency of Saudi banking sector using stochastic frontier model. A sample of 12 banks over the period 2000 -2011 is selected to investigate their technical efficiencies in mobilizing deposits, allocating investments and generating income. The banks are categorized as Saudi-owned banks, Saudi -foreign owned banks and Islamic banks. The findings show some consistent pattern of these bank types; and there exist significant disparities among the banks in terms of technical efficiency. The banque Saudi Fransi stands out as a benchmark for the industry, and it is a Saudi -foreign owned bank type. The Saudi owned bank type has shown fluctuating performance during the period; and the Islamic bank type is not significantly different from Saudi-owned bank type. Keywords: technical efficiency, stochastic frontier analysis, bank type Contributions and implications of the paper: The paper appears to be the second of its kind, after Alkhathlan et al (2010) to study the technical efficiency of Saudi banks.  The paper distinguishes itself from the previous work of Alkhathlan et al (2010) by adding the dimensions of philosophical foundations and ownership structures of the banks in the analysis. It also expands the analysis by looking at three output variables instead of one output variable.  The paper tends to raises a further research question concerning the relationship between the bank performance and its ownership structure and philosophical foundation. Though, the current paper tends to suggest that there exists a relationship between the two; further researches with different samples from Saudi market and around the world are suggested to test this relationship.

A comparative analysis of financial performance of Islamic banks vis-à-vis conventional banks: evidence from Pakistan

“…The surge in Islamic banking has generated debates among policymakers and economists about the sustainability and performance of Islamic banks (IBs). The literature reveals that various studies have evaluated the performance of IBs for different countries in different times, such as Rosly and Bakar (2003), Mokhtar et al (2008), Siraj and Pillai (2012), Elsiefy (2013), Sillah et al (2014), Setyawati et al (2017), Daoud and Kammoun (2017), Akram and Rahman (2018), Johnes et al (2018), Rusydiana and Sanrego (2018), Alsartawi (2019), Berger et al (2019), Mustafa (2019), Ledhem and Mekidiche (2020) and Baeshen and Shaheen (2021). In the case of Pakistan, some studies such as those by Jaffar and Manarvi (2011), Usman and Khan (2012), Ansari and Rehman (2012) and Aziz et al (2016) have measured financial performance of IBs.…”

Investigating the Efficiency of GCC Banking Sector: An Empirical Comparison of Islamic and Conventional Banks

“…Because we compare the performance of Islamic and conventional banks in the GCC, we only reviewed relevant studies. Sillah, Khokhar, and Khan (2014) analyzed the technical efficiency of 12 Saudi banks with the stochastic frontier, yielding mixed results. In Saudi-foreign ownership, the Banque Saudi Fransi was the most efficient in deposits and investments, whereas Al-Rajhi and Samba were the most efficient in income.…”

Do Corporate Governance Internal Characteristics Affect the Level of Sustainability Reporting in Saudi Arabian Banks?

“…In this case, the researcher focuses on the financial sector, targeting banks as they are in more need of corporate governance and sustainability reporting than other institutions due to the nature of their businesses. Primarily, banks accept deposits on behalf of their customers, make loans, and derive profits from interests (zakat) (Sillah & Khan, 2014). In the economy, banks are the most important intermediaries due to their role in connecting surplus and deficit economic agents, hence their actions, positive or negative, affect the entire economy.…”