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Article
Publication date: 3 August 2012

Jamal Ali Al‐Khasawneh, Karima Bassedat, Bora Aktan and Priya Darshini Pun Thapa

The purpose of this paper is twofold. The first and the most important is to examine the efficiency of Islamic banks relative to conventional banks operating in North…

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Abstract

Purpose

The purpose of this paper is twofold. The first and the most important is to examine the efficiency of Islamic banks relative to conventional banks operating in North African Arab countries, in terms of cost and revenue efficiency. The second objective is to assess more evidence regarding the banking system efficiency trend and dynamics in each single country, and to compare such trends among countries included in the study.

Design/methodology/approach

The non‐parametric data envelopment analysis (DEA) was used to estimate cost and revenue efficiency scores assuming variable returns to scale (VRS). The sample consists of nine Islamic banks and 11 conventional banks.

Findings

The results indicated that Islamic banks achieved higher average revenue efficiency scores over conventional banks in this region, while the growth rate of revenue efficiency score of Islamic bank was less than conventional banks. In terms of cost efficiency, the results varied from country to another. The results also showed that both groups of banks were close to each other, with an advantage to conventional banks, which suffer less cost efficiency loss over time compared to Islamic banks.

Research limitations/implications

The very limited data sources (banks' web sites) was was the main limitation faced during preparing for this research. Another limitation was the non‐regularity of annual reports.

Practical implications

Islamic banks are highly challenged in finding investment opportunities/avenues that comply with Islamic regulations, unlike conventional banks that can invest in fixed income securities. There is a serious need for some countries to deregulate their banking systems more, in order to enhance the compatibility and the efficiency of their banking, such as the case of Sudan.

Originality/value

Given the previously mentioned difficulties, decent data set were collected. The value of this paper is the use of nonparametric DEA to analyse cost and revenue efficiences in the countries of this region.

Details

Qualitative Research in Financial Markets, vol. 4 no. 2/3
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 1 August 2001

Athanasios G. Noulas

Outlines the deregulation of banking in Greece and previous research on measuring banking efficiency. Uses 1993‐1998 data to assess the effects of deregulation on both…

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Abstract

Outlines the deregulation of banking in Greece and previous research on measuring banking efficiency. Uses 1993‐1998 data to assess the effects of deregulation on both private and state‐controlled banks. Shows that the state banks were less efficient than the private and that the gap widened during the period for both non‐interest and labour expenses as a proportion of operating income, as the private banks increased their efficiency. Finds the relative efficiency measured by data envelopment analysis supports the greater efficiency of private banks although the difference is only significant at the 5 per cent level for 1996. Compares the four most efficient banks and briefly considers the underlying reasons for the findings.

Details

Managerial Finance, vol. 27 no. 8
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 4 September 2009

Fadzlan Sufian and Razali Haron

The purpose of this paper is to examine the efficiency of the Malaysian banking sector. The technique used by Oliveira and Tabak is extended by employing market data as…

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Abstract

Purpose

The purpose of this paper is to examine the efficiency of the Malaysian banking sector. The technique used by Oliveira and Tabak is extended by employing market data as input and output variables to individual bank stocks, which are listed on the Kuala Lumpur Stock Exchange (KLSE). By doing this, the paper aims to broaden the scope of the existing studies by employing individual bank market data to measure their efficiency levels.

Design/methodology/approach

The paper utilizes the non‐parametric data envelopment analysis methodology to measure the efficiency of banks which are listed on the KLSE. While previous bank efficiency studies have used balance sheet and income statements data, this paper uses individual bank's market data as the input and output variables to construct the efficiency frontier.

Findings

The main conclusion of this paper is that the most efficient bank is also highly ranked in terms of returns with relatively low standard deviation and beta. The results also suggest that all the banks which have managed to appear on the efficiency frontier are mainly based on the relatively higher mean returns rather than lower standard deviations and/or beta.

Research limitations/implications

The approach used in this paper could also be used to other economic sectors, as well as from a multiple countries perspective as this approach allows the comparison of different countries, which have different accounting rules and are not comparable by using standard models. The approach could also be extended to incorporate other input(s) and/or output(s) which could further add to the robustness of the results.

Originality/value

The contribution of the paper consists of proposing a new approach to the measurement of bank efficiency.

Details

International Journal of Commerce and Management, vol. 19 no. 3
Type: Research Article
ISSN: 1056-9219

Keywords

Open Access
Book part
Publication date: 4 May 2018

Anwar Puteh, Muhammad Rasyidin and Nurul Mawaddah

Purpose – The purpose of the research is to analyze the efficiency of Islamic banks in Indonesia. The data used in this research are panel data observed from 2012 until…

Abstract

Purpose – The purpose of the research is to analyze the efficiency of Islamic banks in Indonesia. The data used in this research are panel data observed from 2012 until 2016. The sampling of this research is conducted on five Sharia banks in Indonesia, that is, Bank Muamalat, Bank SyariahMandiri, BukopinSyariah, BRI Syariah, and Bank Mega Syariah.

Design/Methodology/Approach – The study uses a quantitative method to analyze the efficiency of Sharia banking with formulation of comparison of operating expenses to operating revenues (BOPO).

Finding – The result of this research concludes that Sharia banking in Indonesia has not been efficient during the last five years, that is, 2012–2016. This can be seen from the range of banking efficiency ratio. The average level of Islamic banking efficiency ranges between 89.73% and 94.16%. Bank Muamalat whose range is 94.16% shows the highest average efficiency ratio compared to other Sharia banks. Meanwhile, Bank Mega Syariah maintains the lowest average efficiency ratio that is 89.37%. The five Sharia banks have a high efficiency ratio of over 80%. This shows that Sharia banking in Indonesia is inefficient

Originality/Value – The bank should be able to balance between cost (cost) and revenue. Sharia banks must also be able to create good product innovation in order to increase the collection of funds from the community, such as for competitive outcomes, prizes, or other programs that raise public interest to use the services of Sharia banking.

Research Limitations/Implications – This inefficiency is due to the high bank operating costs compared to the bank’s operating income.

Details

Proceedings of MICoMS 2017
Type: Book
ISBN:

Keywords

Article
Publication date: 1 December 1998

Tser‐Yieth Chen and Tsai‐Lien Yeh

The main contribution of this paper is empirical in nature. We use data envelopment analysis to evaluate the relative efficiency of 34 commercial banks in Taiwan. Fifteen…

4074

Abstract

The main contribution of this paper is empirical in nature. We use data envelopment analysis to evaluate the relative efficiency of 34 commercial banks in Taiwan. Fifteen banks are identified as efficient ones and they are divided into four sub‐groups. Conversely, 19 banks are attributed as inefficient ones and the slack analysis are followed. The inefficient banks can effectively promote resource utilization efficiency by better handling their labour and capital operating efficiency and enlarging bank investment function. In addition, we compare the data envelopment analysis results to the financial ratios and show that a consistent effect cannot be obtained. This is to say that we cannot derive which bank has a higher performance from financial ratio analysis only.

Details

International Journal of Service Industry Management, vol. 9 no. 5
Type: Research Article
ISSN: 0956-4233

Keywords

Article
Publication date: 1 January 1997

Michel Dietsch

Major structural changes have affected the French banking industry during the second half of the 1980s, what suggests that the French banks were operating with a…

Abstract

Major structural changes have affected the French banking industry during the second half of the 1980s, what suggests that the French banks were operating with a significant level of inefficiencies before this period. The purpose of this study is to present estimates of X‐Efficiencies and Scale‐Efficiencies in French banks for the 1988–1992 period which followed this wave of changes. The data are annual accounting data for corporate, mutual and savings banks. The sample contains 375 depository banks. By using the “distribution free” method of efficiency estimation, our estimations show that average X‐efficiencies of the French banks are in the range of 70% to 90%. Our results confirm also the existence of scale economies in French banking industry. Scale efficiency estimates show clearly that French banks could reduce average costs by about 15% on average by increasing size in order to reach the efficient size. Note that this result is also in conformity with the hypothesis that some excess capacity could exist in French banking industry.

Details

Managerial Finance, vol. 23 no. 1
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 12 April 2022

Paolo Coccorese and Biswa Swarup Misra

This paper investigates the relationship between market power and efficiency for Indian banks in order to test the validity of the quiet life hypothesis (QLH) during 2005–2019.

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Abstract

Purpose

This paper investigates the relationship between market power and efficiency for Indian banks in order to test the validity of the quiet life hypothesis (QLH) during 2005–2019.

Design/methodology/approach

First, the bank-level DEA efficiency scores and three measures of the Lerner index: traditional, efficiency-adjusted, stochastic are estimated. Then, efficiency scores are regressed on Lerner indices plus a set of banking and economic control variables.

Findings

Robust evidence against the QLH is obtained. Moreover, the conventional Lerner index suggests that market power of Indian banks, as well as of the different bank groups, increased during the study period, due to a greater reduction in costs compared to that of the price of banking services. The efficiency scores also declined for the banking system as a whole, and for all bank groups except new private banks.

Originality/value

This is the first study testing the QLH for the different categories of Indian banks and also provides robust inferences by using both stochastic and non-stochastic measures of market power.

Details

Managerial Finance, vol. 48 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 10 March 2022

Bijoy Rakshit

This paper aims to investigate the effects of cost, revenue and profit efficiency on bank profitability in an emerging economy such as India over the period 1997 to 2017…

Abstract

Purpose

This paper aims to investigate the effects of cost, revenue and profit efficiency on bank profitability in an emerging economy such as India over the period 1997 to 2017. Additionally, this study examines the effect of efficiency on profitability across different ownership groups for a panel of 70 Indian commercial banks.

Design/methodology/approach

In the first stage, using stochastic frontier analysis, we estimate the efficiency scores of cost, revenue and profit over the examined period. In the second stage, this study uses the two-step system generalized-method of moments dynamic panel approach to investigate the impact of several efficiency measures on bank profitability.

Findings

Results estimated through and system generalized-method of moments indicate that a higher level of cost, revenue and efficiency significantly improves India's bank profitability. Regarding ownership groups, this study finds that the public sector banks are most cost-efficient compared to private and foreign banks. Other bank-specific, macroeconomic and institutional variables have played a significant role in determining bank profitability.

Practical implications

The findings of the study extend some important policy implications. In light of the rapid decline in bank profitability, banks should focus on increasing the efficiency of their operations. Improvement in profit, cost and revenue efficiency can ameliorate bank performance significantly. Profit efficiency that takes into account both cost and revenue efficiency should be maintained reasonably to prevent the declining pattern of bank profitability that the industry has witnessed over the years.

Originality/value

To the best of the author's knowledge, this study is a fresh piece of research that fulfils an urgent need of investigating the dynamics between bank efficiency and bank profitability in India. In an emerging economy like India, where the banking sector has witnessed substantial structural transformations over the past two decades, such study demands an immediate empirical investigation.

Details

International Journal of Organizational Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1934-8835

Keywords

Article
Publication date: 18 March 2022

Francisca Omama Koranteng, Faisal Iddris, Gabriel Dwomoh and Courage Simon Kofi Dogbe

This study explored the moderating role of organizational culture in the relationship between organizational leadership and organizational culture in the banking sector.

Abstract

Purpose

This study explored the moderating role of organizational culture in the relationship between organizational leadership and organizational culture in the banking sector.

Design/methodology/approach

The sample comprised of 331 full-time bank employees in the Ashanti region of Ghana. The reliability and validity of the data was tested using confirmatory factor analysis, with structural equation modeling as the main means of analysis, run using Amos (V23) in the data analysis.

Findings

The study concluded that all four leadership styles (transformational, transactional, servant and sustainable leadership styles) had a positive effect on banks' efficiency. Organizational culture also had a direct positive effect on banks' efficiency in Ghana. The study concludes that organizational culture positively moderated the relationship between organizational leadership and organizational efficiency in the banking industry. This implies organizational culture strengthens the relationship between organizational leadership and organizational efficiency in the banking industry.

Research limitations/implications

– A limitation of this study was to consider organizational culture as a composite variable, instead of considering the effects of the individual dimensions (clan culture, adhocracy culture, hierarchy culture and market culture). Although using the composite variable was not theoretically wrong, each of the four dimensions had unique characteristics and may influence organizational outcomes differently, and should have been considered.

Practical implications

To achieve strategic organizational outcomes, leaders are to comprehend the various leaderships styles and how they could be transformed to influence organizational outcomes.

Originality/value

Past studies have paid limited attention to the interaction between organizational leadership and organizational culture, and how this affects organizational efficiency.

Details

Evidence-based HRM: a Global Forum for Empirical Scholarship, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-3983

Keywords

Article
Publication date: 10 February 2022

Isaac Boadi, Raymond Dziwornu and Daniel Osarfo

The marginalization of women on boards is a heavily discussed topic across the world, especially in Ghana. Apart from estimating the link between boardroom gender…

Abstract

Purpose

The marginalization of women on boards is a heavily discussed topic across the world, especially in Ghana. Apart from estimating the link between boardroom gender diversity and technical efficiency of banks, this study aims to test the presence of upper echelons theory in the Ghanaian banking sector.

Design/methodology/approach

The study examines data from 2000 to 2019 annual reports of 23 banks in Ghana. The stochastic frontier analysis is used to estimate the impact of boardroom gender diversity on technical efficiency of banks in Ghana.

Findings

This study finds that greater boardroom gender diversity generates technical efficiencies for banks. The results remain unchanged after accounting for bank types (listed and non-listed). Thus, all banks benefit in terms of technical efficiency from more boardroom gender diversity. The upper echelons theory is validated in the Ghanaian banking context. Overall, the study supports pro-gender diversity on boards.

Practical implications

The results have implications at corporate, social and national levels. It supports the need for policies that improve greater boardroom gender diversity.

Originality/value

This study adds to a growing number of non-developed countries by investigating the link between the boardroom gender diversity and technical efficiency of banks in Ghana, a country which historically has had minimal female participation in the workforce. New insight is, therefore, offered into this relationship by using data which examines the technical efficiency of banks periods before and after the Women in Finance Charter in 2016.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

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