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Book part
Publication date: 14 December 2018

Shatha Qamhieh Hashem and Islam Abdeljawad

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic…

Abstract

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic resilience of three types of banks: fully fledged Islamic banks, purely conventional banks (CB), and CB with Islamic windows. The authors use the market-based systemic risk measures of marginal expected shortfall and systemic risk to identify which type is more vulnerable to a systemic event. The authors also use ΔCoVaR to identify which type contributes more to a systemic event. Using a sample of observations on 27 publicly traded banks operating over the 2005–2014 period, the authors find that CB is the least resilient sector to a systemic event, and is the one that has the highest contribution to systemic risk during crisis times.

Details

Management of Islamic Finance: Principle, Practice, and Performance
Type: Book
ISBN: 978-1-78756-403-9

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Book part
Publication date: 19 December 2016

Norbani Che-Ha, Zalfa Laili Hamzah, Mohd Edil Abd Sukor, Saad Mohd Said and Komala Veeriah

Islamic banking contributes significantly to the total assets of Malaysian banking sector. Yet, many argue that Islamic banking in Malaysia does not receive satisfactory…

Abstract

Purpose

Islamic banking contributes significantly to the total assets of Malaysian banking sector. Yet, many argue that Islamic banking in Malaysia does not receive satisfactory support and participation from the public mainly due to poor awareness of its products and services and misconception about the Islamic banking system. It is timely to study consumers’ awareness of Islamic banking in the hopes of providing useful strategies for and assistance with marketing plans. This study is to explore consumer awareness towards Islamic banking products and services across a diverse set of demographic variables.

Methodology/approach

A quantitative approach was used in this study. A total of 1,000 questionnaires were distributed via convenience and snowballing sampling method to bank customers in a public university in Malaysia, and 817 responses from the survey were used for the analysis. Descriptive and non-parametric statistics were employed to answer objectives of this study.

Findings

The findings of this study are anticipated to provide a holistic and comprehensive marketing insight to improve and strengthen Islamic banking in Malaysia.

Originality/value

This study examines the role of demographics such age, gender, race/religion, education level, occupation and income level in trying to understand the issues of Islamic banks’ product awareness. It is well accepted that the consumer’s attitude or behaviour should be studied among others through understanding customers’ demographics.

Details

Advances in Islamic Finance, Marketing, and Management
Type: Book
ISBN: 978-1-78635-899-8

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Article
Publication date: 29 July 2021

Mohammad Shahid Zaman and Anup Kumar Bhandari

This paper examines the technical efficiency (TE) of Indian commercial banks during 1998–2015.

Abstract

Purpose

This paper examines the technical efficiency (TE) of Indian commercial banks during 1998–2015.

Design/methodology/approach

This study uses mathematical programming-based data envelopment analysis (DEA) methodology to measure technical efficiency of Indian banks. Further, Simar and Wilson (2007) double bootstrap procedure is applied to examine the determinants of efficiency of the Indian banks, by examining the effects of various bank specific and other contextual variables.

Findings

The results indicate substantial upward bias in the conventional efficiency estimates of the Indian commercial banks. Needless to note, such upward bias is consistent with the theoretical postulates. The bootstrapped regression results show that increasing capital adequacy ratio is positively associated with bank efficiency. The popular belief that non-performing assets have a dampening effect on performance of banks is validated. Among others, ownership category is observed to be an important determining factor of bank efficiency. Specifically, state-owned banks (SOBs) are relatively lagging behind the foreign banks. Moreover, larger banks are observed to have a significantly higher level of efficiency, therefore, recent official policy initiatives toward consolidation of SOBs are validated.

Originality/value

As this study uses Simar and Wilson (2007) bootstrap approach, it enables the authors to have an estimate of the extent of bias in the traditional DEA TE scores. It also helps us drawing consistent inferences by rectifying the problem of serial correlation in the conventional second stage regression in this regard.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 5 October 2010

Walid Mansour, Mohamed Ben Abdelhamid, Omar Masood and G.S.K. Niazi

Islamic banking is an increasingly important factor in the UK financial environment. With Islamic banks entering the industry in significant numbers – and competing…

Abstract

Purpose

Islamic banking is an increasingly important factor in the UK financial environment. With Islamic banks entering the industry in significant numbers – and competing directly with the incumbent “conventional” ones – the question of selection criteria of the banks' customers is of obvious interest. The purpose of this paper is to study the decision‐making process of a sample of UK customers and the factors that may influence them.

Design/methodology/approach

The paper uses a sample of 156 UK questionnaire respondents, comprising Muslim and non‐Muslim bank customers alike. The methodological approach is partly borrowed from Masood et al. with the chosen questions aimed at finding out what drives the selection process of bank customers.

Findings

The paper's major findings show that, irrespective of the demographic features and the religion of the respondents, the criterion “low services charges” is the top customers' criteria. The Islamic nature of the bank is, however, placed second, pointing to the importance of religious orientation.

Research limitations/implications

The major limitation of the paper relates to the size of the sample of respondents. The findings of the paper are likely to be of interest to UK banks determining how best to attract customers in the new era. Future research may usefully focus on an international comparison of bank selection criteria by employing an index of religiosity.

Originality/value

The paper is of particular value because it focuses on the choice of banking in the context of the recent significant growth in the Islamic banking industry in the UK.

Details

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

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Article
Publication date: 9 November 2015

Aparna Bhatia and Megha Mahendru

The paper aims to analyze the revenue efficiency (RE) of Scheduled Commercial Banks in India. The study also determines the nature of Return to Scale (RTS) of banks and…

Abstract

Purpose

The paper aims to analyze the revenue efficiency (RE) of Scheduled Commercial Banks in India. The study also determines the nature of Return to Scale (RTS) of banks and thereby identifies the leaders and laggards in the Indian Banking Sector.

Design/methodology/approach

RE of banks is calculated by using the non-parametric approach, namely, data envelopment analysis. Further, the efficiency scores are decomposed into technical and allocative efficiency.

Findings

Public Sector Banks have higher RE as compared to their counterparts in private and foreign sectors. The choice of operating on incorrect scale is identified as the primary reason of inefficiency. It is suggested that banks should expand their business by opening new branches and also try to increase their customer base. Overall, it is seen that trends in RE are somewhat affected by the dynamism in the environment along with the bank-specific factors.

Originality/value

With specific reference to India, less empirical work has been carried out with respect to RE. None of the studies has identified that revenue inefficiency is caused either by mispricing of outputs or giving wrong choice of outputs.

Details

Indian Growth and Development Review, vol. 8 no. 2
Type: Research Article
ISSN: 1753-8254

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Article
Publication date: 6 July 2015

Rachita Gulati

The purpose of this paper is to examine the trends of cost efficiency (CE) of Indian banks in response to financial deregulation programme launched in early 1990s. More…

Abstract

Purpose

The purpose of this paper is to examine the trends of cost efficiency (CE) of Indian banks in response to financial deregulation programme launched in early 1990s. More specifically, the findings of this paper offer empirical testing of the basic underlined hypothesis that the CE of banks will rise in the more liberal and competitive environment.

Design/methodology/approach

The study employs input-oriented data envelopment analysis (DEA) models that incorporate the quasi-fixed inputs to compute the cost, technical, and allocative efficiency scores for individual banks. The unbalanced panel data spanning from the financial year 1992-1993 to 2007-2008 are used for obtaining efficiency measures. In addition, the panel data Tobit model has been applied to investigate the bank-specific factors explaining variations in the CE.

Findings

The empirical findings pertaining to the trends of efficiency measures suggest that: first, deregulation programme has had a positive impact on the CE of Indian banks, and the observed increase in CE is entirely due to improvements in technical efficiency (TE); second, the ranking of ownership groups provides that public sector banks are more cost efficient along with the foreign than private banks; and third, there is a strong presence of global advantage hypothesis in the Indian banking industry. The results of post-DEA analysis reveal that size and exposure to off-balance sheet activities are the key determinants of CE. The results also support the existence of bad luck or bad management hypothesis in Indian banking industry.

Practical implications

The practical implication of the research findings is that the financial deregulation programme seems to be successful in achieving the CE gains in the Indian banking industry. This explicitly signals that the cautious approach of banking reforms adopted by Indian policy makers has started bearing fruit in terms of the creation of an efficient banking system, which is immune to any sort of financial crisis, and resilient to both internal and external shocks.

Originality/value

The present study offers new evidence on the time-series properties of cost, allocative, and TEs of Indian banks. The DEA models used in this study explicitly incorporate the equity as a quasi-fixed input, which accounts for “risk” in the bank efficiency measurement.

Details

Benchmarking: An International Journal, vol. 22 no. 5
Type: Research Article
ISSN: 1463-5771

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Article
Publication date: 22 February 2008

Hamim S. Ahmad Mokhtar, Naziruddin Abdullah and Syed M. Alhabshi

In an attempt to enrich the literature of the efficiency of Islamic banks, this study aims to empirically investigate the efficiency of the fully fledged Islamic banks as…

Abstract

Purpose

In an attempt to enrich the literature of the efficiency of Islamic banks, this study aims to empirically investigate the efficiency of the fully fledged Islamic banks as well as Islamic windows in Malaysia.

Design/methodology/approach

This study measures the technical and cost‐efficiencies of these banks using the non‐parametric frontier method, data envelopment analysis (DEA).

Findings

The findings show that, on average, the efficiency of the overall Islamic banking industry has increased during the period of study. The study also revealed that, although the fully fledged Islamic banks were more efficient than the Islamic windows, they were still less efficient than the conventional banks. Finally, Islamic windows of the foreign banks were found to be more efficient than Islamic windows of the domestic banks.

Originality/value

The findings of this study will provide some empirical insights as to how these two modes of Islamic banks had fared in the competitive environment from 1997 to 2003.

Details

Humanomics, vol. 24 no. 1
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 12 November 2018

Aparna Bhatia and Megha Mahendru

This paper aims to endeavour to assess revenue efficiency (RE) scores of Scheduled Commercial Banks operating in India. Differences in RE are studied across varying…

Abstract

Purpose

This paper aims to endeavour to assess revenue efficiency (RE) scores of Scheduled Commercial Banks operating in India. Differences in RE are studied across varying ownership as well. The study also determines the nature of return to scale of Indian SCBs as whole as well as classified across ownership. Number of banks operating as leaders and laggards has also been calculated.

Design/methodology/approach

RE of banks is calculated by using the non-parametric approach, namely, data envelopment analysis (DEA). Further, the differences in the efficiency scores are examined by applying Panel Tobit Regression.

Findings

The results of DEA suggest that none of the banks has ever achieved full RE score of 1 in any of the years under study. An inconsistent pattern of RE is seen. Private sector banks have performed better than their counterparts in public and foreign sector. Maximum number of banks operating on decreasing return to scale are from public sector, and the highest number of banks operating on constant return to scale belong to Foreign Sector. More number of banks operates as laggards in the Indian financial system. Thus, there still exists room for improvement for banks in all sectors.

Originality/value

With specific reference to India, less empirical work has been carried out with respect to RE. As only two studies so far from the literature are available that consider RE exclusively, namely, Ram Mohan and Ray (2004) and Bhatia and Mahendru (2015). However, Ram Mohan and Ray (2004) considered only the reformatory phase, whereas Bhatia and Mahendru (2015) analyzed the performance for specific points of time only. None of the study has been able to give any concrete findings according to sector-wise performance of banks in terms of RE parameters.

Details

International Journal of Law and Management, vol. 60 no. 6
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 8 May 2017

Megha Mahendru and Aparna Bhatia

This paper aims to analyze the cost, revenue and profit efficiency performance of Indian scheduled commercial banks. The study also determines differences if any related…

Abstract

Purpose

This paper aims to analyze the cost, revenue and profit efficiency performance of Indian scheduled commercial banks. The study also determines differences if any related to efficiency among banks on the basis of ownership pattern.

Design/methodology/approach

Cost, revenue and profit efficiency of banks is calculated by using the non-parametric approach, namely, data envelopment analysis. Further, the differences in the efficiency scores are examined by applying analysis of variance.

Findings

Indian scheduled commercial banks have not been able to maintain their input-output synchronization in terms of cost, revenue and profits in the year 2012-2013. Foreign sector banks have higher cost and profit efficiency as compared to their counterparts in private and public sector, whereas public sector banks are found to have been more revenue efficient.

Originality/value

With specific reference to India, less empirical work has been carried out with respect to cost, revenue and profit efficiency. None of the studies have evaluated the sector-wise performance of banks in terms of all three efficiency parameters.

Details

International Journal of Law and Management, vol. 59 no. 3
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 7 September 2018

Aparna Bhatia and Megha Mahendru

The purpose of this paper is to analyze and evaluate cost efficiency (CE) scores of Indian Scheduled Commercial Banks (SCBs) in India over a period of 22 years, i.e…

Abstract

Purpose

The purpose of this paper is to analyze and evaluate cost efficiency (CE) scores of Indian Scheduled Commercial Banks (SCBs) in India over a period of 22 years, i.e. 1991–1992 to 2012–2013.

Design/methodology/approach

Data envelopment analysis (DEA) – a non-parametric approach is used to calculate efficiency scores of banks. Further the efficiency scores are decomposed into technical and allocative efficiency. The differences in the efficiency scores across ownership as well as across reformatory and post-reformatory era are examined by applying Panel Tobit Regression.

Findings

The paper also identifies the reason for cost inefficiency among Indian banks. In addition, the nature of their return to scale of all SCBs has also been evaluated. The results of the paper depict that Indian SCBs have never achieved full CE score of 1 in any of the years of study. The dominant reason identified behind cost inefficiency is allocative inefficiency. Surprisingly, the results also highlight that SCBs exhibit higher CE scores in reformatory era as compared to the post-reformatory era.

Originality/value

With specific reference to India, even lesser literature is found on CE. Indian banking sector has witnessed many changes on account of liberalization, privatization and globalization (LPG). Before banks adapted to the new environment, the global financial crisis acted as a fuel to fire affecting the performance of banks. Thus, a reassessment over a longer period would help to know a wholistic view of the issue of cost inefficiency, which has always been a troubling factor for Indian banks.

Details

Journal of Management Development, vol. 37 no. 7
Type: Research Article
ISSN: 0262-1711

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