Technical efficiency determinants within a dual banking system: a DEA-bootstrap approach

Hamdani Hanen, Ali Emrouznejad, Mohamed Nejib Ouertani*

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

The purpose of this study is to provide a comparative analysis of the efficiency of Islamic and conventional banks in Gulf Cooperation Council (GCC) countries. In this study, we explain inefficiencies obtained by introducing firm-specific as well as macroeconomic variables. Our findings indicate that during the eight years of study, conventional banks largely outperform Islamic banks with an average technical efficiency score of 81% compared to 95.57%. However, it is clear that since 2008, efficiency of conventional banks was in a downward trend while the efficiency of their Islamic counterparts was in an upward trend since 2009. This indicates that Islamic banks have succeeded to maintain a level of efficiency during the subprime crisis period. Finally, for the whole sample, the analysis demonstrates the strong link of macroeconomic indicators with efficiency for GCC banks. Surprisingly, we have not found any significant relationship in the case of Islamic banks.

Original languageEnglish
Pages (from-to)382-404
Number of pages23
JournalInternational Journal of Applied Decision Sciences
Volume7
Issue number4
DOIs
Publication statusPublished - 31 Dec 2014

Keywords

  • DEA-bootstrap model
  • economic freedom
  • GCC
  • gulf Cooperation Council
  • Islamic banks
  • technical efficiency

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