Comparative performance of Islamic and conventional banks in Europe

Ahmad M. Abu-Alkheil, Hans-Peter Burghof and Walayet A. Khan

American Journal of Finance and Accounting, 2013, vol. 3, issue 1, 1-23

Abstract: We employ data envelopment analysis (DEA) to examine the relative efficiency of Islamic and conventional banks in the UK and Switzerland during 2008-2009, accounting ratio analysis to measure the financial performance of the European Islamic Investment Bank (EIIB) during 2005-2008, and a matched-pairs t-test to determine the differences in the EIIB performance in the pre-versus post financial crisis periods, respectively. Results suggest that the Islamic banks in Europe experience lower cost efficiency, higher allocative inefficiency and poor, but relatively better, technical efficiency compared to conventional banks. The inefficiency of the banks is mostly due to their sub-optimal size of operations. Findings further show that the EIIB exhibits a clear paradox between its high operating efficiency and low profitability. EIIB gradually became illiquid but still remains solvent. A comparison of the bank's performance in the periods before and after the crisis does not show statistically significant differences.

Keywords: data envelopment analysis; DEA; X-efficiency performance; Islamic banks; UK; United Kingdom; Islamic finance; conventional banks; banking efficiency; accounting ratio analysis; financial performance; European Islamic Investment Bank; EIIB; cost efficiency; technical efficiency; banking inefficiency; operating efficiency; profitability; bank performance. (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.inderscience.com/link.php?id=57167 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:amerfa:v:3:y:2013:i:1:p:1-23

Access Statistics for this article

More articles in American Journal of Finance and Accounting from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().