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Financial Performance Evaluation of Islamic Banking System: A Comparative Study among Malaysia’s Banks

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  • Samsudin, Hazman

    (School of Social and Economic Development Universiti Malaysia Terengganu 21300 Kuala Terengganu Terengganu MALAYSIA)

  • Nawawi, Mohd Nasir

    (School of Social and Economic Development Universiti Malaysia Terengganu 21300 Kuala Terengganu Terengganu MALAYSIA)

  • Abdul Halim, Zairihan

    (School of Social and Economic Development Universiti Malaysia Terengganu 21300 Kuala Terengganu Terengganu MALAYSIA)

  • Md Said, Ahmad Syahmi

    (School of Social and Economic Development Universiti Malaysia Terengganu 21300 Kuala Terengganu Terengganu MALAYSIA)

Abstract

The promotion of Islamic banking is parallel with the aim of Malaysia to be the pioneer of Islamic financial hub in the region. With the recent commitment, it is timely to further examine the performance of the industry constituents. Therefore, this study aims to investigate the performance of Islamic banking system in comparison to its conventional counterpart in Malaysia using CAMEL model. For that purpose, annual financial data collected from ten conventional and Islamic banks in Malaysia since 2004 until 2016 is used in the analysis. Both Dynamic Ordinary Least Square (DOLS) and Fully Modified Ordinary Least Square (FMOLS) estimations technique as suggested by Pedroni (2001) are employed. We find that conventional banking system performed better than its counterpart. The maturity of conventional banks which has treads Malaysia’s financial market earlier could plausibly dominate the results. Our evidence suggests that the regulators should strengthen Islamic banking system through more reforms and mergers to improve its capital, assets, management, earnings and liquidity.

Suggested Citation

  • Samsudin, Hazman & Nawawi, Mohd Nasir & Abdul Halim, Zairihan & Md Said, Ahmad Syahmi, 2018. "Financial Performance Evaluation of Islamic Banking System: A Comparative Study among Malaysia’s Banks," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(2), pages 137-147.
    • Handle: RePEc:ukm:jlekon:v:52:y:2018:i:2:p:137-147
    DOI: http://dx.doi.org/10.17576/JEM-2018-5202-11
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    References listed on IDEAS

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    Cited by:

    1. Hanif, Muhammad & Farooqi, M Nauman, 2023. "Objective Performance Evaluation of The Islamic Banking Services Industry: Evidence from Pakistan," OSF Preprints e3pxd, Center for Open Science.

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