Modeling Islamic banks' efficiency: a non-parametric frontier approach
Purpose – The purpose of this paper is to measure the relative efficiency of the top 100 Islamic banks. The sensitivity of the results is also investigated. Design/methodology/approach – Data envelopment analysis (DEA) method was applied to evaluate the relative efficiency of Islamic banks using cross-sectional data for the year 2009. The use of DEA to measure Islamic banks' efficiency appears especially appropriate since this method does not require the specification of particular production or cost functions. Findings – The results indicate that the performance of several banks is sub-optimal, suggesting the potential for significant improvements. Separate benchmarks were derived for possible reductions in resources used, and significant savings are possible on this account. Originality/value – From a policy perspective, the paper highlights the importance of encouraging increased efficiency throughout the Islamic banking industry.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 4 (2011)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=imefm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bonesronning, Hans & Rattso, Jorn, 1994. "Efficiency variation among the Norwegian High Schools: Consequences of equalization policy," Economics of Education Review, Elsevier, vol. 13(4), pages 289-304.
- Isik, Ihsan & Hassan, M. Kabir, 2002. "Technical, scale and allocative efficiencies of Turkish banking industry," Journal of Banking & Finance, Elsevier, vol. 26(4), pages 719-766, April.
- Fadzlan Sufian & Mohamad Akbar Noor Mohamad Noor, 2009. "The determinants of Islamic banks' efficiency changes: Empirical evidence from the MENA and Asian banking sectors," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 2(2), pages 120-138, June.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
- Miller, Stephen M. & Noulas, Athanasios G., 1996. "The technical efficiency of large bank production," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 495-509, April.
- M. Stone, 2002. "How not to measure the efficiency of public services (and how one might)," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 165(3), pages 405-434.
- Berger, Allen N. & Humphrey, David B., 1997.
"Efficiency of financial institutions: International survey and directions for future research,"
European Journal of Operational Research,
Elsevier, vol. 98(2), pages 175-212, April.
- Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series 1997-11, Board of Governors of the Federal Reserve System (U.S.).
- Allen N. Berger & David B. Humphrey, 1997. "Efficiency of Financial Institutions: International Survey and Directions for Future Research," Center for Financial Institutions Working Papers 97-05, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Cook, Wade D. & Hababou, Moez, 2001. "Sales performance measurement in bank branches," Omega, Elsevier, vol. 29(4), pages 299-307, August.
- David Hauner, 2005.
"Explaining efficiency differences among large German and Austrian banks,"
Taylor & Francis Journals, vol. 37(9), pages 969-980.
- David Hauner, 2004. "Explaining Efficiency Differences Among Large German and Austrian Banks," IMF Working Papers 04/140, International Monetary Fund.
- Brenda Gannon, 2005.
"Testing for Variation in Technical Efficiency of Hospitals in Ireland,"
The Economic and Social Review,
Economic and Social Studies, vol. 36(3), pages 273-294.
- Gannon, Brenda, 2005. "Testing for Variation in Technical Efficiency of Hospitals in Ireland," Papers HRBWP20, Economic and Social Research Institute (ESRI).
- Olson, Dennis & Zoubi, Taisier A., 2008. "Using accounting ratios to distinguish between Islamic and conventional banks in the GCC region," The International Journal of Accounting, Elsevier, vol. 43(1), pages 45-65, March.
- Shinn Sun & Wen-Min Lu, 2005. "Evaluating The Performance Of The Taiwanese Hotel Industry Using A Weight Slacks-Based Measure," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 487-512.
- Fadzlan Sufian, 2007. "The efficiency of Islamic banking industry in Malaysia: Foreign vs domestic banks," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 23(3), pages 174-192, July.
- Carlos Pestana Barros & Manolis Athanassiou, 2004. "Efficiency in European Seaports with DEA: Evidence from Greece and Portugal," Maritime Economics and Logistics, Palgrave Macmillan, vol. 6(2), pages 122-140, June.
- Laurent Weill, 2004. "Measuring Cost Efficiency in European Banking: A Comparison of Frontier Techniques," Journal of Productivity Analysis, Springer, vol. 21(2), pages 133-152, March.
- Paul W. Bauer & Allen N. Berger & Gary D. Ferrier & David B. Humphrey, 1997.
"Consistency conditions for regulatory analysis of financial institutions: a comparison of frontier efficiency methods,"
Finance and Economics Discussion Series
1997-50, Board of Governors of the Federal Reserve System (U.S.).
- Bauer, Paul W. & Berger, Allen N. & Ferrier, Gary D. & Humphrey, David B., 1998. "Consistency Conditions for Regulatory Analysis of Financial Institutions: A Comparison of Frontier Efficiency Methods," Journal of Economics and Business, Elsevier, vol. 50(2), pages 85-114, March.
- Paul W. Bauer & Allen N. Berger & Gary D. Ferrier & David B. Humphrey, 1997. "Consistency conditions for regulatory analysis of financial institutions: a comparison of frontier efficiency methods," Financial Services working paper 97-02, Federal Reserve Bank of Cleveland.
- Hawdon, David, 2003. "Efficiency, performance and regulation of the international gas industry--a bootstrap DEA approach," Energy Policy, Elsevier, vol. 31(11), pages 1167-1178, September.
- Hamim S. Ahmad Mokhtar & Naziruddin Abdullah & Syed M. Alhabshi, 2008. "Efficiency and competition of Islamic banking in Malaysia," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 24(1), pages 28-48, February.
- 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.
- Athanassopoulos, Antreas D., 1997. "Service quality and operating efficiency synergies for management control in the provision of financial services: Evidence from Greek bank branches," European Journal of Operational Research, Elsevier, vol. 98(2), pages 300-313, April.
- Raymond L. Raab & Richard W. Lichty, 2002. "Identifying Subareas That Comprise A Greater Metropolitan Area: The Criterion of County Relative Efficiency," Journal of Regional Science, Wiley Blackwell, vol. 42(3), pages 579-594.
- Sherman, H. David & Rupert, Timothy J., 2006. "Do bank mergers have hidden or foregone value? Realized and unrealized operating synergies in one bank merger," European Journal of Operational Research, Elsevier, vol. 168(1), pages 253-268, January.
- Lawrence M. Seiford & Joe Zhu, 1999. "Profitability and Marketability of the Top 55 U.S. Commercial Banks," Management Science, INFORMS, vol. 45(9), pages 1270-1288, September.
- Taufiq Hassan & Shamsher Mohamad & Mohammed Khaled I. Bader, 2009. "Efficiency of conventional versus Islamic banks: evidence from the Middle East," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 2(1), pages 46-65, April.
When requesting a correction, please mention this item's handle: RePEc:eme:imefpp:v:4:y:2011:i:1:p:7-29. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.