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Article
Publication date: 10 November 2020

Ioannis Anagnostopoulos, Emmanouil Noikokyris and George Giannopoulos

The purpose of this paper is to comparatively examine the cost and the overlooked revenue efficiency of Islamic and commercial banks in the aftermath of the crisis, operating in…

Abstract

Purpose

The purpose of this paper is to comparatively examine the cost and the overlooked revenue efficiency of Islamic and commercial banks in the aftermath of the crisis, operating in nine MENA-based countries during the 2010-2017 financial period, where the established empirical work is relatively limited. The authors also update the research where they use recent data sets and they provide for a targeted, structured literature review pre- and post-crisis in the Gulf region.

Design/methodology/approach

The authors examine cost and revenue efficiency of 25 major Islamic banks (IBs) and 25 major conventional banks (CBs). They conduct tests on the determinants of such variables. In the first stage of the analysis, they measure efficiency by using the data envelopment analysis (DEA) technique. The analysis performs regressions where these also reveal that the bank efficiency index is influenced by various bank type-specific attributes. It also seems that tighter restrictions on bank activities are negatively associated with bank efficiency. Second stage analysis, which accounts for banking environment and bank-level characteristics, confirms these results.

Findings

Conventional banks are both more cost and revenue efficient than Islamic banks over the period under examination. The analysis also reveals that the bank efficiency index is influenced by bank-type attributes. Greater presence of fixed capital resources has positive effects on growth in both Islamic and conventional banking. The major constraints impeding Islamic banking growth include labour costs. The authors examine whether and how bank-type orientation affects the cost and revenue efficiency of conventional and Islamic banks. They find that post-crisis Islamic banks underperform their conventional counterparts on both accounts within a mixed banking system.

Research limitations/implications

This study did not include comparative data before the 2008 financial crisis. There is also a great deal of heterogeneity among Islamic banks in the samples that have been examined here and by other researchers and the constructed efficiency scores should be interpreted cautiously as divergent Islamic banks are pooled in the same samples.

Practical implications

This study identified factors that may help bank managers to improve their financial outlook by controlling revenue and cost efficiency profitability. These factors could as well help to understand how some indicators affect both cost and revenue efficiency, particularly in Islamic banking. It also seems that tighter restrictions on Islamic bank activities are negatively associated with bank efficiency. Islamic banks that directly compete with their conventional counterparts in the aftermath of the crisis are less efficient on both the cost and revenue frontiers. They are potentially hindered by the differential regulations of supervising authorities in dual banking systems.

Social implications

The authors provide recommendations regarding regulatory and other issues that are relevant to Islamic banking and further research is suggested. Findings are relevant to a variety of stakeholders (managers, policymakers and regulators). Islamic banking authorities could re-examine the benefits of partially moving to a more standardized/conventional system of banking by lifting some trading restrictions. In addition, developing and maintaining managerial skills is an indispensable instrument for the long-term endurance of any system. A related aspect is thus an effort to determine the holistic efficiency (including managerial) of Islamic banks as a guide for policymakers to improve managerial performance.

Originality/value

There is relatively limited empirical work that investigates the efficiency between Islamic and conventional banking in the aftermath of the crisis in the Gulf region despite the growing importance of this region on political and economic levels. The authors also examine the revenue efficiency measure often under-researched in the literature and particularly important for comparative studies. Overseas-owned banks have attained much higher infiltration levels in middle-eastern countries over the past decade. It has also been suggested that market penetration differences may also be related to bank efficiency concerns among countries and their financial systems as opposed to types of banks.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 9
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 13 September 2011

Yiannis Anagnostopoulos and Roger Buckland

The purpose of this paper is to make an empirical contribution by investigating the boundaries between external financial reporting and decision making through assessing the…

1117

Abstract

Purpose

The purpose of this paper is to make an empirical contribution by investigating the boundaries between external financial reporting and decision making through assessing the degree of differences among practitioners’ perspectives of financial reporting measurement attributes across two countries, and the impact of the “domestic” practice through cultural factors on the implementation of financial accounting and regulation.

Design/methodology/approach

The authors employ the method of triangulation by employing two research instruments, namely interviews and a questionnaire. Triangulation cuts across and within research strategies, as one of its features as a processual technique is to cross‐check results deriving from both quantitative and qualitative research. Cross‐national studies is a very useful tool that can provide a basis for competing explanations, identifying the importance of regional factors across a universally‐changing environment or discriminating between explanations that are country‐specific and those that are universally applicable.

Findings

This study provides evidence for a diverging perceived effectiveness and acceptance of IAS39 in two different banking markets (Greece and the UK), suggesting that culture and domestic configurations play an important part in shaping management perceptions and that given these differences, the choice of a measurement system can potentially also affect the (re)liability of managers that sign a firm's financial reports.

Practical implications

Topical settings can potentially influence the preferences and perceptions of managers with regards to particular measurement bases as part of the wider accounting framework instituted by international authorities, as well as raise significant barriers to harmonisation efforts.

Originality/value

This paper seeks to examine the chasm between regulation and accounting through the lens of topical/domestic configurations of accounting practice and its application. The reason for doing so is also because of the recent structural developments in the international finance arena, namely signs of creation of markets for impaired assets.

Details

Journal of Applied Accounting Research, vol. 12 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

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