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Risks and Efficiency in the Islamic Banking Systems: The Case of Selected Islamic Banks in MENA Region

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  • Ali Said

    (Strayer University, United States)

Abstract

The present paper examined the correlation between risks and efficiency within Islamic banks in the MENA area. This paper used three stages of analyses. The first stage consisted of measuring the efficiency of those banks by employing the nonparametric technique, Data Envelopment Analysis (DEA) while the second stage involved analyzing risks by measure credit, operational, and liquidity risks using financial ratios. The third stage would be employing Pearson Correlation Coefficients to examine the correlation between credit, operational, liquidity risks to efficiency for the period of 2006 to 2009. The study results have revealed credit risk has negative relationship to efficiency, while operational risk has found to be negatively correlated to efficiency too. The liquidity risk showed insignificant correlation to efficiency in Islamic banks in MENA area.

Suggested Citation

  • Ali Said, 2013. "Risks and Efficiency in the Islamic Banking Systems: The Case of Selected Islamic Banks in MENA Region," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 66-73.
  • Handle: RePEc:eco:journ1:2013-01-7
    as

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    References listed on IDEAS

    as
    1. Hameeda Abu Hussain, 2012. "Risk management practices of conventional and Islamic banks in Bahrain," Journal of Risk Finance, Emerald Group Publishing, vol. 13(3), pages 215-239, May.
    2. Pejman Abedifar & Philip Molyneux & Amine Tarazi, 2013. "Risk in Islamic Banking," Review of Finance, European Finance Association, vol. 17(6), pages 2035-2096.
    3. Yudistira, Donsyah, 2004. "Efficiency In Islamic Banking: An Empirical Analysis Of Eighteen Banks," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 12, pages 2-19.
    4. Anjum Siddiqui, 2008. "Financial contracts, risk and performance of Islamic banking," Managerial Finance, Emerald Group Publishing, vol. 34(10), pages 680-694, August.
    5. Pastor, JoseManuel & Perez, Francisco & Quesada, Javier, 1997. "Efficiency analysis in banking firms: An international comparison," European Journal of Operational Research, Elsevier, vol. 98(2), pages 395-407, April.
    6. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    7. Bauer, Wolfgang & Ryser, Marc, 2004. "Risk management strategies for banks," Journal of Banking & Finance, Elsevier, vol. 28(2), pages 331-352, February.
    8. repec:lan:wpaper:601084 is not listed on IDEAS
    9. Hussein A. Hassan Al-Tamimi & Faris Mohammed Al-Mazrooei, 2007. "Banks' risk management: a comparison study of UAE national and foreign banks," Journal of Risk Finance, Emerald Group Publishing, vol. 8(4), pages 394-409, August.
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    Citations

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    Cited by:

    1. Waeibrorheem Waemustafa & Suriani Sukri, 2015. "Bank Specific and Macroeconomics Dynamic Determinants of Credit Risk in Islamic Banks and Conventional Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 476-481.
    2. Imène Berguiga & Philippe Adair & Nadia Zrelli & Ali Abdallah, 2017. "The performance of Islamic banks in the MENA region: Are specific risks a minor attribute?," Working Papers hal-01667412, HAL.
    3. Nadia Zrelli & Imene Berguiga & Ali Abdallah & Philippe Adair, 2017. "Risques spécifiques et profitabilité des banques islamiques en région MENA," Post-Print hal-01667423, HAL.
    4. Aysen ALTUN ADA & Nilufer DALKILIC, 2014. "Efficiency Analysis in Islamic Banks: A Study for Malaysia and Turkey," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 8(1), pages 9-33.

    More about this item

    Keywords

    Efficiency; Liquidity Risk; Credit Risk; Operational Risk; Islamic Banks; MENA banking; Data Envelopment Analysis;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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