Managing bank performance under COVID‐19: A novel inverse DEA efficiency approach

Abstract

The evolution of the COVID‐19 pandemic is highly unpredictable; however, its impacts are limited to neither a single sector nor a single country. This study evaluates the performance and efficiency of 49 Islamic banks across 10 countries during 2019–2020 to assess how those banks can preserve their performance and remain resilient in the aftermath of the COVID‐19 pandemic. Using the conventional inverse data envelopment analysis (InvDEA) approach, we show that because of reductions in their outputs, 31 out of the 49 banks studied would need to reduce their inputs so that their efficiency can remain unchanged. However, we show that only 10 banks need to make such adjustments to maintain their efficiency levels using our proposed InvDEA efficiency model. The adjustment for those 10 banks would help in reducing more inputs, suggesting more cost savings, and improving the overall efficiency of the examined banks, compared with the other 31 banks.

The environment, social and governance (ESG) activities and profitability under COVID-19: evidence from the global banking sector

“…One may also extend our study to a larger sample (e.g. using the BankScope database), different profitability and performance measurements such as technical or cost efficiency (Boubaker et al, 2022;Le et al, 2022b), and to other advanced methodologies such as the auto-regressive distributed lag (ARDL) with structural break, Bayesian or machine learning (Haans et al, 2016;Preciado Arreola et al, 2020;Zhao et al, 2020;Thaker et al, 2021). We look forward to such studies contributing to the literature on ESG and bank performance amid the COVID-19 pandemic.…”

“…Since the COVID-19 is an ongoing issue, and because of the data availability constraint (e.g., we could not collect data on bank ownership, or data on GDP and inflation were not available after 2020), we expect that future research could provide a more comprehensive analysis to strengthen our findings. One may also extend our study to a larger sample (e.g., using the BankScope database), different profitability and performance measurements such as technical or cost efficiency (Boubaker et al, 2022;Le et al, 2022b), and other advanced methodologies such as the auto-regressive distributed lag (ARDL) with structural break, Bayesian or machine learning (Haans et al, 2016;Preciado Arreola et al, 2020;Zhao et al, 2020;Thaker et al, 2021). We look forward to such studies contributing to the literature on ESG and bank performance amid the COVID-19 pandemic.…”

“…The impacts of the COVID-19 pandemic have been examined in the banking (Wang et al, 2021;Borri and Giorgio, 2022;Boubaker et al, 2022;Le et al, 2022a) as well as in the non-bank sector (Narayan, 2020;Haroon et al, 2021). Studies on the ESG-performance relationship under COVID-19, however, are still limited.…”

“…It is understandable that the governments worldwide implemented the social distancing policy JED 24,4 and lockdown measures. This thus will affect households' income and firms' revenue, thus impacting their ability to pay their debts (Elnahass et al, 2021;Boubaker et al, 2022;Le et al, 2022a). However, the profitability of the global banking system increased in 2021, which signalled a recovery phase.…”

Basel III Capital Regulations and Bank Efficiency: Evidence from Selected African Countries

“…It has been adopted across several disciplines, one of which is business and finance research. Boubaker et al (2022) and Vidal-García et al (2018) adopted the DEA approach in their studies and found it suitable for examining efficiency.…”