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Research output: Working paper
Research output: Working paper
}
TY - UNPB
T1 - A comparison of performance of Islamic and conventional banks 2004 to 2009
AU - Johnes, Jill
AU - Izzeldin, Marwan
AU - Pappas, Vasileios
PY - 2012/10
Y1 - 2012/10
N2 - We compare, using data envelopment analysis (DEA), the performance of Islamic and conventional banks prior to, during and immediately after the 2008 financial crisis (2004-2009). There is no significant difference in mean efficiency between conventional and Islamic banks when efficiency is measured relative to a common frontier. A meta-frontier analysis (MFA), new to the banking context, however, reveals some fundamental differences between the two bank categories. In particular, the efficiency frontier for Islamic banks typically lies inside the frontier for conventional banks, suggesting that the Islamic banking system is less efficient than the conventional one. Managers of Islamic banks, however, make up for this as mean efficiency in Islamic banks is higher than in conventional banks when efficiency is measured relative to their own bank type frontier. A second-stage analysis demonstrates that the differences between the two banking systems remain even after the banking environment and bank-level characteristics have been taken into account. Our findings will be useful to both policy-makers and managers.
AB - We compare, using data envelopment analysis (DEA), the performance of Islamic and conventional banks prior to, during and immediately after the 2008 financial crisis (2004-2009). There is no significant difference in mean efficiency between conventional and Islamic banks when efficiency is measured relative to a common frontier. A meta-frontier analysis (MFA), new to the banking context, however, reveals some fundamental differences between the two bank categories. In particular, the efficiency frontier for Islamic banks typically lies inside the frontier for conventional banks, suggesting that the Islamic banking system is less efficient than the conventional one. Managers of Islamic banks, however, make up for this as mean efficiency in Islamic banks is higher than in conventional banks when efficiency is measured relative to their own bank type frontier. A second-stage analysis demonstrates that the differences between the two banking systems remain even after the banking environment and bank-level characteristics have been taken into account. Our findings will be useful to both policy-makers and managers.
KW - Banking sector
KW - Islamic banking
KW - Efficiency
KW - Data Envelopment Analysis
KW - Meta-frontier analysis
M3 - Working paper
BT - A comparison of performance of Islamic and conventional banks 2004 to 2009
PB - Lancaster University, Department of Economics
CY - Lancaster
ER -