Technical efficiency of Islamic and conventional banks with undesirable output: Evidence from a stochastic meta-frontier directional distance function

Md Safiullah and Abul Shamsuddin ()

Global Finance Journal, 2022, vol. 51, issue C

Abstract: We examine technical efficiency of Islamic and conventional banks. We contribute to the literature by applying a stochastic meta-frontier directional distance function model with undesirable output, which helps to overcome misestimating technical efficiency. For a sample of banks from 28 countries, we find that a typical Islamic bank is less technically efficient compared to its conventional counterpart. This is due to Islamic banks using less advanced technology compared to conventional banks rather than group-specific technical inefficiency. The findings are robust across six geographical regions of the world.

Keywords: Technical inefficiency; Islamic banking; Undesirable output; Stochastic meta-frontier; Directional distance function (search for similar items in EconPapers)
JEL-codes: D24 G21 G28 G34 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:51:y:2022:i:c:s104402832030017x

DOI: 10.1016/j.gfj.2020.100547

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