Banking efficiency in Gulf Cooperation Council (GCC) countries: A comparative study

Sunil K. Mohanty, Hong-Jen Lin, Eid A. Aljuhani and Hisham J. Bardesi

Review of Financial Economics, 2016, vol. 31, issue C, 99-107

Abstract: We measure cost and profit efficiencies of banks operating in six GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) using heteroskedastic stochastic frontier (HSF) models. Our results show that measures of cost and profit efficiencies of banks vary widely across the six gulf countries over the same period. We examine whether cost and profit efficiencies of Islamic banks are significantly different from that of conventional banks. After allowing for bank risk, asset quality, environmental influences such as the level of interest rate, and country effect, we find that cost and profit efficiencies of Islamic banks are similar to that of conventional banks. Our results suggest that the country-specific variables have significant impact on cost and profit efficiencies of banks operating in GCC countries. Our findings indicate that cost and profit efficiencies of Islamic banks are more volatile than that of conventional banks.

Keywords: Stochastic frontier; Cost efficiency; Profit efficiency (search for similar items in EconPapers)
JEL-codes: F23 F33 G21 G28 G34 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:31:y:2016:i:c:p:99-107

DOI: 10.1016/j.rfe.2016.06.004

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