Efficiency of Islamic and conventional banks in Malaysia

Purpose – 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. Design/methodology/approach – Data envelopment analysis (DEA) was initially used, to investigate the cost efficiency of t...

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Main Authors:	Farhana, Ismail, M. Shabri, Abd. Majid, Rossazana, Ab. Rahim
Format:	Article
Language:	English
Published:	Emerald Group Publishing Limited 2013
Subjects:	HG Finance
Online Access:	http://ir.unimas.my/16682/ http://ir.unimas.my/16682/ http://ir.unimas.my/16682/ http://ir.unimas.my/16682/1/Efficiency%20of%20Islamic%20and%20conventional%20banks%20in%20Malaysia%20%28abstract%29.pdf

id	unimas-16682
recordtype	eprints
spelling	unimas-166822017-06-16T07:01:03Z http://ir.unimas.my/16682/ Efficiency of Islamic and conventional banks in Malaysia Farhana, Ismail M. Shabri, Abd. Majid Rossazana, Ab. Rahim HG Finance Purpose – 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. Design/methodology/approach – Data envelopment analysis (DEA) was initially used, to investigate the cost efficiency of the Malaysian banking sector and followed by Tobit regression analysis determine factors influencing the efficiency of Islamic and conventional banks in Malaysia. Findings – The DEA results reveal technical efficiency as the main contributor of cost efficiency for conventional commercial banks and allocative efficiency as the main contributor for 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 Tobit regression analysis are twofold. First, it documents capitalization and bank sizes are positively and significantly associated to efficiency. Secondly, loan quality is found to be negatively and significantly associated to efficiency. Originality/value – 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. Emerald Group Publishing Limited 2013 Article PeerReviewed text en http://ir.unimas.my/16682/1/Efficiency%20of%20Islamic%20and%20conventional%20banks%20in%20Malaysia%20%28abstract%29.pdf Farhana, Ismail and M. Shabri, Abd. Majid and Rossazana, Ab. Rahim (2013) Efficiency of Islamic and conventional banks in Malaysia. Journal of Financial Reporting and Accounting, 11 (1). pp. 92-107. ISSN 1985-2517 http://www.emeraldinsight.com/doi/full/10.1108/JFRA-03-2013-0011?mobileUi=0 DOI 10.1108/JFRA-03-2013-0011
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Malaysia Sarawak
building	UNIMAS Institutional Repository
collection	Online Access
language	English
topic	HG Finance
spellingShingle	HG Finance Farhana, Ismail M. Shabri, Abd. Majid Rossazana, Ab. Rahim Efficiency of Islamic and conventional banks in Malaysia
description	Purpose – 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. Design/methodology/approach – Data envelopment analysis (DEA) was initially used, to investigate the cost efficiency of the Malaysian banking sector and followed by Tobit regression analysis determine factors influencing the efficiency of Islamic and conventional banks in Malaysia. Findings – The DEA results reveal technical efficiency as the main contributor of cost efficiency for conventional commercial banks and allocative efficiency as the main contributor for 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 Tobit regression analysis are twofold. First, it documents capitalization and bank sizes are positively and significantly associated to efficiency. Secondly, loan quality is found to be negatively and significantly associated to efficiency. Originality/value – 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.
format	Article
author	Farhana, Ismail M. Shabri, Abd. Majid Rossazana, Ab. Rahim
author_facet	Farhana, Ismail M. Shabri, Abd. Majid Rossazana, Ab. Rahim
author_sort	Farhana, Ismail
title	Efficiency of Islamic and conventional banks in Malaysia
title_short	Efficiency of Islamic and conventional banks in Malaysia
title_full	Efficiency of Islamic and conventional banks in Malaysia
title_fullStr	Efficiency of Islamic and conventional banks in Malaysia
title_full_unstemmed	Efficiency of Islamic and conventional banks in Malaysia
title_sort	efficiency of islamic and conventional banks in malaysia
publisher	Emerald Group Publishing Limited
publishDate	2013
url	http://ir.unimas.my/16682/ http://ir.unimas.my/16682/ http://ir.unimas.my/16682/ http://ir.unimas.my/16682/1/Efficiency%20of%20Islamic%20and%20conventional%20banks%20in%20Malaysia%20%28abstract%29.pdf
first_indexed	2018-09-06T16:30:42Z
last_indexed	2018-09-06T16:30:42Z
_version_	1610876392416739328

Efficiency of Islamic and conventional banks in Malaysia

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