Impact of financial crisis on banking sector efficiency in the Arab world

Baljeet Singh, Nasser Elkanj, Chadi Yaacoub and Vladimir Dzenopoljac

International Journal of Development and Conflict, 2017, vol. 7, issue 1, 49-64

Abstract: This paper examines the impact of 2007 financial crisis on the efficiency of 49 banks listed in the Forbes top 100 companies in the Arab World, by applying Data Envelopment Analysis (DEA). The intermediation process was applied with net interest income and non-interest income as outputs and interest expense and non-interest expense as inputs. DEA is used to estimate the overall technical efficiency for each bank which is composed of two components: scale efficiency and pure technical efficiency. The empirical results suggest that during financial crisis banks suffered from lower technical efficiency as a result of deterioration in pure technical efficiency. The lower levels of both technical and pure technical efficiency can be attributed to the close bonds of the region with the international financial system. Also, DEA identified the interest expense as the most common source of inefficiency for the studied banks during the financial crisis period.

Keywords: Banking sector; Financial crisis; Efficiency; Data Envelopment Analysis (search for similar items in EconPapers)
Date: 2017
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