Conventional and Islamic Banks’ Performance in the Gulf Cooperation Council Countries; Efficiency and Determinants

Ihsen Abid (), Mohamed Goaied () and Mouldi Ben Ammar ()
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Ihsen Abid: North American Private University
Mohamed Goaied: Qatar University
Mouldi Ben Ammar: Qatar University

Journal of Quantitative Economics, 2019, vol. 17, issue 3, No 9, 623-665

Abstract: Abstract This paper investigates the cost efficiency levels of the banking sectors of the Gulf Cooperation Council (GCC) countries for the period from 2001 to 2015 and provides a comparison of conventional and Islamic banks. We obtain measures of efficiency using a stochastic frontier model and the meta-frontier approach. The evidence demonstrates that Islamic banks are less efficient and have a weaker level of production technology than conventional banks. The cost efficiency of banks varies significantly across the six Gulf countries and over time. We adopt the results drawn from the meta-frontier model that allow to take into account the differences between the studied countries, and empirically examine the bank-specific, financial, macroeconomic, and political determinants of banking efficiency. The results provide evidence of the differential effects of the selected variables on the efficiency of conventional and Islamic banks. These variables affect the performance of the two types of banks in different ways and with different magnitudes.

Keywords: GCC countries; Conventional and Islamic banks; Meta-frontier approach; Cost efficiency; Determinants of bank performance (search for similar items in EconPapers)
JEL-codes: C23 C61 D21 G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s40953-018-0139-2

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