Cost and profit efficiency of conventional and Islamic banks in GCC countries

Springer Science and Business Media LLC - Tập 34 - Trang 45-62 - 2009
Samir Abderrazek Srairi1
1Riyadh Community College, King Saud University, Kingdom of Saudi Arabia, Riyadh, Kingdom of Saudi Arabia

Tóm tắt

Using stochastic frontier approach, this paper investigates the cost and profit efficiency levels of 71 commercial banks in Gulf cooperation council countries over the period 1999–2007. This study also conducts a comparative analysis of the efficiency across countries and between conventional and Islamic banks. Moreover, we examine the bank-specific variables that may explain the sources of inefficiency. The empirical results indicate that banks in the Gulf region are relatively more efficient at generating profits than at controlling costs. We also find that in terms of both cost and profit efficiency levels, the conventional banks on average are more efficient than Islamic banks. Furthermore, we observe a positive correlation of cost and profit efficiency with bank capitalization and profitability, and a negative one with operation cost. Higher loan activity increases the profit efficiency of banks, but it has a negative impact on cost efficiency.

Tài liệu tham khảo

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