Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis

Christos Alexakis 1 Marwan Izzeldin 2 Jill Johnes 3 Vasileios Pappas 4
1 Rennes School of Business
2 LUMS - Lancaster University Management School
3 University of Huddersfield
4 Kent Business School
Abstract : We assess the performance and productivity of Islamic and conventional banks using financial ratios, a two- and a four-component meta-frontier Malmquist productivity index (MPI). We focus on the relatively homogenous GCC region over the 2006–2012 period that covers the global financial crisis. We find that Islamic banks exhibit worse cost and profit performance but are on a par with regards to revenue performance compared to the conventional ones. The components of the meta-frontier MPI suggest that the technology of conventional banks improves markedly in years leading to the financial crisis and declines thereafter. Islamic banks show a similar but more muted pattern. By contrast, the pronounced within-Islamic bank group variation in technical efficiency and technology suggests that Islamic banks are quite heterogeneous as a group. Overall, the MPI analysis suggests that the two bank types are more aligned following the global financial crisis. Policy makers should be wary of the important variations within the Islamic banking industry when implementing bank regulations.
Keywords : Performance Banking sector Financial ratios Meta-frontier Malmquist productivity analysis Gulf Cooperation Council
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Journal articles
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https://hal-rennes-sb.archives-ouvertes.fr/hal-02143291
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Submitted on : Wednesday, May 29, 2019 - 11:33:21 AM
Last modification on : Thursday, May 30, 2019 - 1:02:48 AM

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Christos Alexakis, Marwan Izzeldin, Jill Johnes, Vasileios Pappas. Performance and productivity in Islamic and conventional banks: Evidence from the global financial crisis. Economic Modelling, Elsevier, 2019, 79, pp.1-14. ⟨10.1016/j.econmod.2018.09.030⟩. ⟨hal-02143291⟩

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