What is it about?
The main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.
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Why is it important?
This paper contributes to the body of knowledge through its literature discussions on the efficiency of both Islamic and conventional banks and the effect of banks' specific characteristics on their efficiency.
Perspectives
The DEA results reveal technical efficiency as the main contributor to cost efficiency for conventional commercial banks and allocative efficiency as the main contributor to the cost efficiency of Islamic commercial banks. This indicates conventional commercial banks have been efficient in utilizing information technology and electronics. Islamic commercial banks conversely have been efficient in allocating and utilizing their resources. Additionally, scale efficiency is found to be the main source of technical efficiency for both Islamic and conventional commercial banks, denoting that size is important in improving bank efficiency. The results of the Tobit regression analysis are twofold. First, it documents capitalization and bank sizes are positively and significantly associated with efficiency. Secondly, loan quality is found to be negatively and significantly associated with efficiency.
Prof. Dr. M. Shabri Abd. Majid
Universitas Syiah Kuala
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This page is a summary of: Efficiency of Islamic and conventional banks in Malaysia, Journal of Financial Reporting and Accounting, June 2013, Emerald,
DOI: 10.1108/jfra-03-2013-0011.
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