Conventional versus Islamic bank efficiency: A dynamic network data-envelopment-analysis approach
Document Type
Article
Publication Date
1-1-2021
Abstract
This study compares the efficiency of conventional and Islamic banks in Malaysia by engaging in a dynamic three-step (production, intermediation, and profitability) network data envelopment analysis (DEA). The inputs and outputs for the DEA model are selected based on the CAMELS rating. The major contributions of this study are threefold. First, this study investigates the efficiency of Malaysian banks using a novel dynamic network DEA model. Second, the Malaysian banking industry is found to be efficient in creating earning assets rather than in creating loans or profit. The results reveal that only a few banks in Malaysia have been efficient in converting deposits and equities into profit. Third, Islamic banks, in general, have been performing efficiently in the production and profitability approaches. Conventional banks, in contrast, are found to have been efficient in the intermediation approach. Policy implications are derived from the main conclusions.
Keywords
Data envelopment analysis, Efficiency, Network DEA, Malaysia
Divisions
FacultyofEconomicsAdministration
Publication Title
Journal of Intelligent & Fuzzy Systems
Volume
40
Issue
2
Publisher
IOS Press
Publisher Location
NIEUWE HEMWEG 6B, 1013 BG AMSTERDAM, NETHERLANDS