Title: Technical efficiency determinants within a dual banking system: a DEA-bootstrap approach

Authors: Hamdani Hanen; Ali Emrouznejad; Mohamed Nejib Ouertani

Addresses: Faculty of Economics and Management, Sfax, Tunisia ' Aston Business School, Aston University Birmingham, B4 7ET, UK ' Faculty of Economics and Management, Sfax, Tunisia

Abstract: The purpose of this study is to provide a comparative analysis of the efficiency of Islamic and conventional banks in Gulf Cooperation Council (GCC) countries. In this study, we explain inefficiencies obtained by introducing firm-specific as well as macroeconomic variables. Our findings indicate that during the eight years of study, conventional banks largely outperform Islamic banks with an average technical efficiency score of 81% compared to 95.57%. However, it is clear that since 2008, efficiency of conventional banks was in a downward trend while the efficiency of their Islamic counterparts was in an upward trend since 2009. This indicates that Islamic banks have succeeded to maintain a level of efficiency during the subprime crisis period. Finally, for the whole sample, the analysis demonstrates the strong link of macroeconomic indicators with efficiency for GCC banks. Surprisingly, we have not found any significant relationship in the case of Islamic banks.

Keywords: technical efficiency; dual banking; Islamic banks; bootstrap DEA; data envelopment analysis; Gulf Cooperation Council; GCC; economic freedom; Middle East; banking industry; firm specific variables; macroeconomic variables; subprime crisis; macroeconomic indicators; Islamic finance.

DOI: 10.1504/IJADS.2014.065223

International Journal of Applied Decision Sciences, 2014 Vol.7 No.4, pp.382 - 404

Received: 05 Nov 2013
Accepted: 13 Mar 2014
Published online: 27 Oct 2014 *

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