Efficiency and bank profitability in MENA countries

Olson, Dennis; Zoubi, Taisier A.

doi:10.1016/j.ememar.2011.02.003

Cited by 226 publications

(191 citation statements)

References 36 publications

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“…Hypothesis 4: Banks with high COIN ratio are more efficient in profit and less efficient in cost according to previous studies (Bashir, 2003;Hussein, 2003;Olson and Zoubi, 2011). ISSN 2162-3082 2015 www.macrothink.org/ijafr Hypothesis 5: According to Kamaruddinet al (2008), Ben Khediri and Ben-Khedhiri (2009) and Srairi.…”

Section: 2-hypothesis: Bank's Efficiency Determinantmentioning

confidence: 75%

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: 2-hypothesis: Bank's Efficiency Determinantmentioning

confidence: 75%

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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“…A positive impact of efficiency on profitability was confirmed by Aissa and Goaied (2016), Guillén, Rengifo and Ozsoz (2014), Fageda and Voltes-Dorta (2012), Mostafa (2010) or Greene and Segal (2004), among others. On the contrary, Palečková (2015), Shieh (2012), Keramidou et al (2013) or Olson and Zoubi (2011) identified only a small or no relationship between efficiency and profitability. Despite the existence of many studies focusing on the link between efficiency and profitability, little attention has been paid to this relationship in the tourism sector.…”

Section: Literature Reviewmentioning

confidence: 99%

Is profitability a good proxy for efficiency? Evidence from the subsector of tour operators

Hedija

Fiala

Kuncová

2017

Review of Economic Perspectives

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Abstract:The goal of the paper is to evaluate the economic efficiency of tour operators in the Czech Republic in the period 2007-2014 using data envelopment analysis (DEA) models and prove the link between economic efficiency and profitability and to find out if profitability is a good proxy for economic efficiency. Data was exported from the database Albertina CZ Gold Edition. We calculated the efficiency score using CCR (Charnes, Cooper and Rhodes) and BCC (Banker, Charnes and Cooper) models based on 3 inputs and 1 output. In the years 2007 to 2010, the efficiency score of almost all the companies was higher than 0.5; however, in years since 2011, we revealed significant differences in the efficiency of individual firms and only about 40 percent of tour operators achieved an efficiency score higher than 0.5. Using Pearson and Spearman correlation coefficients, our findings show that, in the case of the Czech tour operator market, profitability ratios do not correspond with firm efficiency. Profitability ratios are not a good proxy for economic efficiency and should not be used as the only firm criterion of performance.

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“…The model control variables in this paper are selected and tested based on maximizing the log likelihood function (Olson and Zoubi, 2011). Data interpolation is used to derive the return on assets and Economic Freedom of the World (EFW) indices to maintain a uniform number of observations throughout the analysis.…”

Section: Scope Of the Studymentioning

confidence: 99%

“…Data on these variables are obtained from the World Bank data indicators database. Return on assets (ROA), a widely employed profitability ratio, is measured as average net income to total assets, and reflects the ability of management to utilise bank financial and real investment resources to generate profits, thereby encompassing both management decisions and policy objectives (Sufian and Habibullah, 2010;and Olson and Zoubi, 2011). The cost-income ratio (COSTINC), measured as total overheads or costs of running the bank (the major element of which is normally salaries) to gross income generated before provisions, is essentially a measure of bank cost efficiency, or more precisely, cost inefficiency, as the higher this measure the lower the degree to which costs are under control in relation to income.…”

Section: Bank Performance Variablesmentioning

confidence: 99%

“…A number of authors assess the impact of bank specific characteristics and macroeconomic indicators on firm performance, though the evidence on the strength and direction of the relationships concerned is somewhat mixed (Berger and Humphery, 1997;Ben Naceur and Omran, 2011;Olson and Zoubi, 2011). Other empirical studies focus on the influence of some form of PRI quality on access to external capital (Rajan and Zingales, 1998), firm valuation and earnings quality (La Porta et al, 2002a;Leuz et al, 2003), firm growth (Beck et al, 2005), operating cost savings (Ben Naceur and Omran, 2011), and firm profitability (Verriest et al, 2008).…”

Section: Introductionmentioning

confidence: 99%

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Property rights institutions and bank performance across countries

ElKelish

Tucker

2015

Managerial Finance

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Purpose – The purpose of this paper is to investigate the relationship between the quality of property rights institutions (PRIs) and bank financial performance in an empirical study of 136 countries over the period 1999-2006. Design/methodology/approach – The quality of PRIs and financial accounting-based measures of bank performance are obtained from the Economic Freedom of the World Project (Gwartney et al., 2006), the Polity IV Project, the World Bank data indicators database, and the International Monetary Fund. Several multiple regression analyses are conducted to test the study hypotheses. Findings – The results reveal that the quality of legal structure and security of PRIs positively (negatively) affects both bank cost efficiency (inefficiency) and profitability. The presence of a quality political structure negatively (positively) affects bank cost efficiency (inefficiency). The quality of political structure has no direct impact on bank profitability. The impact of PRIs on bank cost efficiency is more evident in the upper middle and high income group of countries than in the low and lower middle income group of countries. An appropriate level of PRI quality is essential to achieve both competition and development. Practical implications – The paper highlights policy implications for international policy makers, regulators, and the management of banks who are interested in banking sector development across countries. Originality/value – The study investigates the fundamental importance of PRI quality in its effect on the banking sector and extends the largely US-focused literature to a broader international setting.

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Efficiency and bank profitability in MENA countries

Cited by 226 publications

References 36 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

Is profitability a good proxy for efficiency? Evidence from the subsector of tour operators

Property rights institutions and bank performance across countries

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