Efficiency and total factor productivity change of Malaysian commercial banks

Majid, Mariani Abdul; Saal, David S.; Battisti, Giuliana

doi:10.1080/02642069.2010.503882

Cited by 34 publications

(16 citation statements)

References 54 publications

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“…These results provide clear evidence that the Islamic banking system is less efficient than the conventional one. This is in line with earlier conclusions derived using SFA and DEA (Abdul-Majid et al 2008;Johnes et al 2009;Abdul-Majid et al 2011a). The fact that the Islamic banking modus operandi is less efficient than its conventional counterpart comes as no surprise for a number of reasons.…”

Section: First Stage Resultssupporting

confidence: 78%

“…They find (like Abdul-Majid et al 2008;2011a;2011b) that the lower performance of Islamic banks in the Gulf Cooperation Council (GCC) region is due to modus operandi rather than managerial incompetence.…”

Section: Literature Reviewmentioning

confidence: 99%

“…One group of studies deserves particular mention because they make a distinction between 'gross' and 'net' efficiency (Abdul-Majid et al 2008;Johnes et al 2009;Abdul-Majid et al 2010;2011a;2011b). Gross efficiency incorporates both managerial competence and efficiency arising from modus operandi; net efficiency isolates the managerial component and therefore provides a measure of managerial efficiency.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Gross efficiency incorporates both managerial competence and efficiency arising from modus operandi; net efficiency isolates the managerial component and therefore provides a measure of managerial efficiency. In one study based on banks in Malaysia, gross efficiency scores are derived from a SFA estimation of a cost function which makes no allowance for various characteristics of each bank (including whether or not it is Islamic), while net efficiency scores are estimated by taking into account the operating characteristics of banks in the SFA cost function (Abdul-Majid et al 2008;2011a;2011b). Gross efficiency is found to be highest for conventional banks and lowest for Islamic banks, and the significance of the Islamic dummy in the cost equation including the environmental variables suggests that this difference is significant.…”

Section: Literature Reviewmentioning

confidence: 99%

See 3 more Smart Citations

A comparison of performance of Islamic and conventional banks 2004–2009

Johnes¹,

Izzeldin²,

Pappas³

2014

Journal of Economic Behavior & Organization

258

181

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We compare, using data envelopment analysis (DEA) and meta-frontier analysis (MFA), the performance of Islamic and conventional banks during the period [2004][2005][2006][2007][2008][2009]. The use of nonparametric MFA is new to the Islamic banking context. Our DEA finds no significant difference in mean efficiency between conventional and Islamic banks when efficiency is measured relative to a common frontier. The MFA however, reveals some fundamental differences between the two bank types. In particular, the modus operandi in Islamic banking appears to be less efficient on average than the conventional one. Managers of Islamic banks, however, make up for this as mean efficiency in Islamic banks is higher than in conventional banks when efficiency is measured relative to their own bank type frontier. A second-stage analysis shows that differences between the two banking systems remain even after banking environment and bank-level characteristics have been taken into account. These findings are relevant to both policy-makers and regulators. In particular, Islamic banks should explore the benefits of moving to a more standardized system of banking, while the underperformance of conventional bank managers could be examined in the context of the on-going remuneration culture.

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Section: First Stage Resultssupporting

confidence: 78%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

A comparison of performance of Islamic and conventional banks 2004–2009

Johnes¹,

Izzeldin²,

Pappas³

2014

Journal of Economic Behavior & Organization

258

181

View full text Add to dashboard Cite

show abstract

“…Increases in supervisory powers (SUPP) also mostly affect efficiency negatively, with the exception of Hong Kong and Malaysia. For the former the effect is very small to be economically meaningful; for the latter it probably counterbalances the inefficiency deriving from the country's relatively high consolidation and family ownership, as showed also by the result on HHI (Abdul-Majid et al, 2011). Finally, unlike most of the established empirical literature we find a positive, sizeable and significant effect of market discipline (MARD) on efficiency only for the Philippines, the rest of the sample being negative.…”

Section: Resultscontrasting

confidence: 53%

Post-crisis regulatory reforms and bank performance: lessons from Asia

Casu

Deng

Ferrari

2016

The European Journal of Finance

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Islamic Banking and Finance: Recent Empirical Literature and Directions for Future Research

Abedifar¹,

Ebrahim²,

Molyneux³

et al. 2016

A Collection of Reviews on Savings and Wealth Accumulation

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This paper examines the recent empirical literature in Islamic banking and finance, highlights the main findings and provides a guide for future research. Early studies focus on the efficiency, production technology and general performance features of Islamic versus conventional banks, whereas more recent work looks at profit-sharing and loss-bearing (PSLB) behaviour, competition, risks as well as other dimensions such as small business lending and financial inclusion. Apart from key exceptions, the empirical literature suggests no major differences between Islamic and conventional banks in terms of their efficiency, competition and risk features (although small Islamic banks are found to be less risky than their conventional counterparts). There is some evidence that Islamic finance aids inclusion and financial sector development. Results from the empirical finance literature, dominated by studies that focus on the risk/return features of mutual funds, finds that Islamic funds perform as well, if not better, than conventional fundsthere is little evidence that they perform worse than standard industry benchmarks. Some recent evidence, however, suggests that Islamic bond (Sukuk) issuance destroys value for shareholders.

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Efficiency and total factor productivity change of Malaysian commercial banks

Cited by 34 publications

References 54 publications

A comparison of performance of Islamic and conventional banks 2004–2009

A comparison of performance of Islamic and conventional banks 2004–2009

Post-crisis regulatory reforms and bank performance: lessons from Asia

Islamic Banking and Finance: Recent Empirical Literature and Directions for Future Research

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