Efficiency in Islamic Banking an Empirical Analysis of 18 Ba
From HodHood
Contents
Top 20 FREQUENT WORDS
islamic 125 banks 117 efficiency 69 banking 43 assets 29 countries 27 drs 24 sample 22 financial 20 results 20 analysis 19 data 15 based 14 efficient 14 irs 14 medium 13 dea 12 deposits 12 performance 12 technical 12
DOCUMENT KEY POINTS
- efficiency in islamic banking an empirical analysis of banks donsyah yudistiraa august abstract do islamic banks perform efficiently although the phenomenon of islamic banking and finance has developed significantly in recent years only very few studies have tackled this central question
- the concept of scale efficiency was first introduced by farrell which can be simply defined as the relationship between a bank s per unit average production cost and volume and thus a bank is called to have economies of scale when the increase in outputs is accompanied by a lower unit cost of production
- second the x efficiency which was popularised by leibenstein refers to deviations from the cost efficient frontier that depicts the lowest production cost for a given level banking efficiency model is a tool developed by the author to analyse the performance of a bank based on standard accounting ratios analysis
- the more recent study of japanese banks contrast the earlier research and claim that powerful size efficiency relationships are established regarding to both technical and scale efficiency explaining the logic of the large scale merger in japanese banking system drake and hall
- the parametric approach engages in the specification and econometric estimation of a statistical or parametric function while the non parametric method offers a linear boundary by enveloping the experimental data points known as data envelopment analysis dea
- all variables are converted into us dollars using end of year market value and deflated by the consumer price index of each country in order to take account of macroeconomic differences across countries during the time period of the study
- figure efficiency measurements using one output and one input output y c v b q a s r input x o v the efficiency measure from this technology for sth bank at point s is s aq as which also equals to s
- therefore in modeling bank behaviour this paper follows intermediation approach in which dea model consists of outputs and inputs as follows output input y total loans x staff costs y other income x fixed assets y liquid assets x total deposits in spite of the definition of inputs and outputs in measuring efficiency remains the contentious issues as discussed extensively in humprey the reason for choosing the intermediation approach is because of the main character of islamic banks which is often clamied as a joint stock firms which shares are easily tradable dar and presley
- this is because of the sample study consists of islamic banks from countries within which the sample includes gcc countries bahrain kuwait qatar and united arab emirates east asian countries indonesia and malaysia african countries algeria gambia and sudan and other middle east countries egypt jordan yemen
- to capture some aspects of market power with the ratio of bank deposits to the total deposits in the country within which the bank operates the inclusion of market power m p variable is beneficial as suggested by miller and noulas
- adjustment to environmental differences although the sample data has been adjusted for country differences by converting into us dollars and deflating the variables the efficiency scores still recover from the dea and thus perform two stage method as suggested by coelli prasada and battese
- regarding to the minimum efficient scale mes in islamic banking for the end of year the results would suggest that this is obtained by small to medium size islamic banks with asset levels of around mln and by large size islamic banks with asset levels of around
- the finding is similar to the recent us and japanese evidence which typically demonstrates that x inefficiency failure to minimise costs for a given output vector is a more stern setback than scale inefficiency failure to operate at the minimum efficient scale especially during the crisis period berger and humprey drake and hall
- an alternative method should then be required to give a fair treatment for islamic banks although the methodologies are different the results can be compared to the evidence of islamic banks in the middle east area by bashir which finds that k a is strongly significant in determining the performance
- although bank size clearly has prominent argument on scale efficiency it is believed that scale efficiency is also mainly induced by factors regarding to the geographical area and hence the regulation in the country where bank operates
- this would suggest that the interdependence of islamic banks to other financial system is still closely related and any regulator especially in which the bank operates should consider islamic banking in the search of global financial stability
- furthermore negative and statistically significant results on p u b variable shows that publicly listed islamic banks are less efficient than their non listed counterparts
- mehdian an examination of cost structure and production performance of commercial banks in singapore journal of banking and finance a
- hall a capital adequacy framework for islamic banks the need to reconcile depositors risk aversion with managers risk taking loughborough university economics papers
- hassan the performance of malaysian islamic bank during an exploratory study international journal of islamic financial services
- the impact of bank capital requirements in indonesia economics working paper archive at wustl
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DOCUMENT WORD ANALYSIS
Main Category
- AlHuda Material\islamic banking
KeyWords
islamic banks banking financial finance investment conventional institutions funds risk financing deposits assets services management international countries equity profit products
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DOCUMENT REFERENCES
Number of Pages
17
Published Date
2106-02-07 09:28:15
