scholarly journals THE ISLAMIC BANKING AND THE ECONOMIC INTEGRATION IN ASEAN

2016 ◽  
Vol 19 (1) ◽  
pp. 81-106
Author(s):  
Solihin Solihin ◽  
Noer Azam Achsani ◽  
Imam T Saptono
Keyword(s):  
Market Power ◽  
Banking System ◽  
Islamic Banking ◽  
Tobit Regression ◽  
Total Size ◽  
Bank Efficiency ◽  
Internal Factors ◽  
Banking Efficiency ◽  
Important Indicator ◽  
The Cost

The efficiency level of the banking industry is the most important indicator to identify the soundness of banking system. This paper use non parametric frontier approach, DEA, to analyze the Islamic bank efficiency in ASEAN. We use price of deposit from customers, deposits and placements of banks, labor, and others operational expenditures as control variabel, and using financing, deposits and placements on other insitution, securities, others investment as output variabel. We found that the mix bank is the most efficient group within the observation period. Furthermore, the average Islamic banking efficiency in Indonesia, on intermediation approach, is lower than the average of ASEAN, unless they can reduce the cost of labor and other operational expenses. This paper also examines the determinant of efficiency of the Islamic Banking in ASEAN. Internal factors are Total Aset, ROA, BOPO, and ETA, and external faktor are Market Power and Inflation. Using Tobit regression, the result shows the factors that most influence to the Islamic banking efficiency in Indoneisa is the total size of the bank or its assets, OPEX/OR, and Market Power.

Freedom, competition and bank efficiency in Sub-Saharan Africa

2017 ◽  
Vol 59 (6) ◽  
pp. 1359-1380 ◽  
Author(s):  
Emmanuel Sarpong-Kumankoma ◽  
Joshua Abor ◽  
Anthony Q.Q. Aboagye ◽  
Mohammed Amidu
Keyword(s):  
Market Power ◽  
Cost Efficiency ◽  
Stochastic Frontier ◽  
Banking System ◽  
Sub Saharan Africa ◽  
Tobit Regression ◽  
African Countries ◽  
Bank Efficiency ◽  
Content Type ◽  
Sub Saharan

Purpose This study aims to consider the effect of financial (banking) freedom and competition on bank efficiency. Design/methodology/approach With data from 11 Sub-Saharan African countries over the period 2006-2012, the study estimates both competition (market power) and bank cost efficiency using the same stochastic frontier framework. Subsequently, Tobit models, including instrumental variable Tobit regression, are used to assess how financial freedom affects the relationship between competition and bank efficiency. Findings The results show that increase in market power (less competition) leads to greater bank cost efficiency, but the effect is weaker with higher levels of financial freedom. This is not consistent with the quiet life hypothesis. Practical implications Policymakers usually take the view that opening up banking markets to greater competition may lead to higher efficiency. However, the results have shown that allowing banks to maintain some level of market power may be necessary to ensure banking system efficiency. Originality/value This study deepens the understanding of the inconsistent relationship between competition and bank efficiency, by using the same framework to measure both competition and efficiency, and by providing new empirical evidence on how the level of financial freedom affects this relationship.

scholarly journals A meta-crisis banking efficiency study in the MENA region

2020 ◽  
Vol 11 (9) ◽  
pp. 2087-2112
Author(s):  
Ioannis Anagnostopoulos ◽  
Emmanouil Noikokyris ◽  
George Giannopoulos
Keyword(s):  
Empirical Work ◽  
Efficiency Index ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Gulf Region ◽  
Bank Efficiency ◽  
Content Type ◽  
Conventional Banks ◽  
The Cost ◽  
Revenue Efficiency

Purpose The purpose of this paper is to comparatively examine the cost and the overlooked revenue efficiency of Islamic and commercial banks in the aftermath of the crisis, operating in nine MENA-based countries during the 2010-2017 financial period, where the established empirical work is relatively limited. The authors also update the research where they use recent data sets and they provide for a targeted, structured literature review pre- and post-crisis in the Gulf region. Design/methodology/approach The authors examine cost and revenue efficiency of 25 major Islamic banks (IBs) and 25 major conventional banks (CBs). They conduct tests on the determinants of such variables. In the first stage of the analysis, they measure efficiency by using the data envelopment analysis (DEA) technique. The analysis performs regressions where these also reveal that the bank efficiency index is influenced by various bank type-specific attributes. It also seems that tighter restrictions on bank activities are negatively associated with bank efficiency. Second stage analysis, which accounts for banking environment and bank-level characteristics, confirms these results. Findings Conventional banks are both more cost and revenue efficient than Islamic banks over the period under examination. The analysis also reveals that the bank efficiency index is influenced by bank-type attributes. Greater presence of fixed capital resources has positive effects on growth in both Islamic and conventional banking. The major constraints impeding Islamic banking growth include labour costs. The authors examine whether and how bank-type orientation affects the cost and revenue efficiency of conventional and Islamic banks. They find that post-crisis Islamic banks underperform their conventional counterparts on both accounts within a mixed banking system. Research limitations/implications This study did not include comparative data before the 2008 financial crisis. There is also a great deal of heterogeneity among Islamic banks in the samples that have been examined here and by other researchers and the constructed efficiency scores should be interpreted cautiously as divergent Islamic banks are pooled in the same samples. Practical implications This study identified factors that may help bank managers to improve their financial outlook by controlling revenue and cost efficiency profitability. These factors could as well help to understand how some indicators affect both cost and revenue efficiency, particularly in Islamic banking. It also seems that tighter restrictions on Islamic bank activities are negatively associated with bank efficiency. Islamic banks that directly compete with their conventional counterparts in the aftermath of the crisis are less efficient on both the cost and revenue frontiers. They are potentially hindered by the differential regulations of supervising authorities in dual banking systems. Social implications The authors provide recommendations regarding regulatory and other issues that are relevant to Islamic banking and further research is suggested. Findings are relevant to a variety of stakeholders (managers, policymakers and regulators). Islamic banking authorities could re-examine the benefits of partially moving to a more standardized/conventional system of banking by lifting some trading restrictions. In addition, developing and maintaining managerial skills is an indispensable instrument for the long-term endurance of any system. A related aspect is thus an effort to determine the holistic efficiency (including managerial) of Islamic banks as a guide for policymakers to improve managerial performance. Originality/value There is relatively limited empirical work that investigates the efficiency between Islamic and conventional banking in the aftermath of the crisis in the Gulf region despite the growing importance of this region on political and economic levels. The authors also examine the revenue efficiency measure often under-researched in the literature and particularly important for comparative studies. Overseas-owned banks have attained much higher infiltration levels in middle-eastern countries over the past decade. It has also been suggested that market penetration differences may also be related to bank efficiency concerns among countries and their financial systems as opposed to types of banks.

Impact of financial liquidity and solvency on cost efficiency: evidence from US banking system

2020 ◽  
Vol 37 (2) ◽  
pp. 391-410
Author(s):  
Kekoura Sakouvogui ◽  
Saleem Shaik
Keyword(s):  
Financial Crisis ◽  
Cost Efficiency ◽  
Stochastic Frontier Analysis ◽  
Banking System ◽  
Tobit Regression ◽  
Content Type ◽  
Frontier Analysis ◽  
Financial Liquidity ◽  
Domestic Banks ◽  
The Cost

Purpose The purpose of this paper is to evaluate the importance of financial liquidity and solvency on US commercial and domestic banks’ cost efficiency while accounting for internal and external factors. Design/methodology/approach The Stochastic Frontier Analysis and Data Envelopment Analysis estimators are used to estimate the cost efficiency of 11,044  US commercial and domestic banks from 2005 to 2017. Using Tobit regression model, the importance of financial liquidity and solvency on cost efficiency is examined. Findings The results provide evidence that the financial liquidity and solvency negatively impact the cost efficiency of US commercial and domestic banks. Overall, US commercial and domestic banks were inefficient during the financial crisis in comparison to the tranquil period. The importance of financial solvency on the cost efficiency was not statistically significant, while the financial liquidity negatively collapsed because of contagion. Finally, the results provide evidence that the amount of total assets matters in the improvement of the cost efficiency. Originality/value This paper estimates and identifies the 2007-2009 financial crisis with liquidity, solvency or both financial factors.

scholarly journals EFFECTS OF HUMAN RESOURCE MANAGEMENT ON FINANCIAL PERFORMANCE OF BANKING SYSTEM OF THE REPUBLIC OF MOLDOVA

2019 ◽  
pp. 13-18
Author(s):  
Darovannaia Alla ◽  
Lopotenco Viorica
Keyword(s):  
Banking System ◽  
Financial Indicators ◽  
Risk Environment ◽  
Bank Efficiency ◽  
Banking Efficiency ◽  
Staff Management ◽  
Republic Of Moldova ◽  
Related Risk ◽  
The Republic ◽  
The Impact

The main objective of this study is to evaluate the efficiency of the banking system of the Republic of Moldova under the impact of the resources that influence it, focusing on human resources. The assessment of banking efficiency through financial indicators includes some indicators. Analyzing the notion of efficiency it can be seen that it is dependent on several qualitative factors, which gives it a complex character. The study of bank efficiency mainly involves a causal analysis of the factors that determine the decisions in a related risk environment. In the present paper, we intend to analyze in particular the effect of the banking staff management on bank efficiency, as it is mainly dependent on the way the bank employees’ work. One of the essential factors influencing the Moldovan banking system analyzed in the present study is the efficiency of staff management.From the analysis, it can be noticed that there is a link between the banking efficiency and the efficiency of banking staff management. Banks with better indicators of bank management efficiency also have higher banking efficiency.

scholarly journals The Influence of Oil Prices on Islamic Banking Efficiency Scores during the Financial Crisis: Evidence from the MENA Area

2016 ◽  
Vol 4 (3) ◽  
pp. 35
Author(s):  
Ali Said
Keyword(s):  
Financial Crisis ◽  
North Africa ◽  
Banking System ◽  
Oil Prices ◽  
Islamic Banking ◽  
Islamic Banks ◽  
North African ◽  
Banking Efficiency ◽  
Mena Countries ◽  
The North

<p><em>The present paper measured the influence of the oil prices on the Islamic banking efficiencies scores during the financial crisis of 2008-2009. The study showed that there is no a direct relationship between the oil prices and the efficiencies scores of Islamic banks in the MENA area. Furthermore, the study demonstrated that Islamic banks in the GCC area showed a higher mean in pure technical efficiency compared to Islamic banks in the North African and other MENA. Islamic banks in other MENA countries and North Africa considered to be technically inefficient. The inefficiencies were due to the underdeveloped banking system and the lack of experiences in those countries to allocate resources between the bank inputs and outputs. </em></p>

scholarly journals EUROPEAN BANKING INTEGRATION: IS FOREIGN OWNERSHIP AFFECTING BANKING EFFICIENCY?

2014 ◽  
Vol 16 (2) ◽  
pp. 340-368 ◽  
Author(s):  
José Luis Gallizo ◽  
Jordi Moreno ◽  
Manuel Salvador
Keyword(s):  
European Integration ◽  
Cost Efficiency ◽  
Stochastic Frontier ◽  
Foreign Ownership ◽  
Eastern European ◽  
Bank Efficiency ◽  
Banking Efficiency ◽  
European Banking ◽  
Eastern European Countries ◽  
The Cost

The aim of this study is to analyze how European integration and, especially, changes in ownership, has affected banking efficiency in Central and Eastern European countries which have recently experimented this process more intensely. Using a stochastic frontier approach, applied to panel data, we have estimated bank efficiency levels in a sample of 189 banks from 12 countries during the period 2000 to 2008 and we have analyzed the influence of some bank characteristics on these efficiency levels. The results show that European integration has significantly improved the cost efficiency of banks in these countries, but profit efficiency has significantly decreased. We have found very small differences between different ownership types and only a very small impact of foreign ownership on cost efficiency, showing that the entry of foreign ownership is not enough to explain the significant variations in banking efficiency after the accession.

scholarly journals Financing Schemes and Lost Profit Sharing in Islamic Banking : Challenges and Opportunities

2020 ◽  
Vol 3 (1) ◽  
pp. 1-13
Author(s):  
Syarifuddin Syarifuddin
Keyword(s):  
Banking System ◽  
Profit Sharing ◽  
External Factors ◽  
Government Support ◽  
Monitoring Systems ◽  
Islamic Banking ◽  
Main Mode ◽  
Internal Factors ◽  
Challenges And Opportunities ◽  
Lost Profit

A profit and lost sharing system is an agreement between a financier (shahibul mal) and a capital manager (mudharib) to run a particular economic business with a profit sharing and risk loss scheme. At this time a lot of literature encourages PLS schemes as the main mode of Islamic banking system, but in practice it is avoided. The research aims to theoretically evaluate the causes of PLS ​​contracts in Islamic banking fail to be fully accepted and be excellent for investors in Islamic Banking. The results showed that the use of PLS ​​(mudharabah and musharakah) schemes in Islamic (sharia) Banking in Indonesia, Malaysia, Pakistan, Turkey and Morocco did show a low percentage of total financing. There are internal factors and external factors that hinder the development of PLS ​​schemes. Internal factors include moral hazard concern from partners, low trust in partners, weak monitoring systems, weak capabilities and collateral from partner companies. While external factors include; public literacy on Islamic banking products, government support, and supervision from regulators. Some of these factors arise because of a misunderstanding of the PLS system. Therefore, it is necessary to reprogram the perception of Shahibul mal and mudarib in the PLS scheme. This research is expected to contribute to the development and improvement of PLS ​​schemes in Islamic Banking.

scholarly journals Determinants of Islamic Bank Credit Risk in ASEAN Countries

2020 ◽  
Vol 8 (3) ◽  
pp. 1
Author(s):  
Kamarudin Othman ◽  
Jamilah Binti Laidin ◽  
Nor Azira Ismail
Keyword(s):  
Credit Risk ◽  
Interest Rates ◽  
Data Model ◽  
Banking System ◽  
Bank Credit ◽  
Islamic Banking ◽  
Internal Factors ◽  
Islamic Bank ◽  
Long Run ◽  
Asean Countries

Ialamic banking system have been establish more than 30 years ago around the world. However, until today it still facing a lot of obstacles especially in term of credit risk. Thus, the aims of this study is to examine the external (macroeconomic) and internal economic factors that influencing Islamic bank credit risk in ASEAN countries. By using 29 of Islamic banking data in ASEAN from years 2011 until 2018, panel data model was applied in this study. The results from the long run regression of FLOMS, DLOS and PMG suggest management efficiency (MGT) and capital ratio (CR) are the internal factors affects the credit risk of  ASEAN Islamic bank. Economic growth, inflation and interest rates are external factors that also found could influencing the Islamic bank credit risk. More research ought to be carried out so that one can understand how credit risk is created in Islamic banking. The finding obtained will provide the further understanding of how Islamic banks should tackle the obstacles they face in order to manage their credit risk

scholarly journals COMPETITITON POWER, RISK AND EFFICIENCY: EVIDENCE FROM VIETNAM COMMERCIAL BANKING SYSTEM

2020 ◽  
Vol 42 (06) ◽  
Author(s):  
DƯƠNG THỊ ÁNH TIÊN ◽  
PHẠM VIỆT HÙNG
Keyword(s):  
Market Power ◽  
Banking System ◽  
Commercial Banking ◽  
Competitive Power ◽  
Bank Efficiency ◽  
System Gmm ◽  
Factors Affecting ◽  
Macroeconomic Variables ◽  
Negatively Associated ◽  
Positive Effect

The main purpose of this paper investigates factors affecting bank efficiency, especially competitive power and risk in the context of Vietnamese banks from 2005-2014. The authors use a number of indicators to measure risk and efficiency. The study also considers other factors including industry and macroeconomic variables. Employing two step system GMM, the authors find that risk is negatively associated with bank efficiency. Market power has a positive effect on bank efficiency. The authors also find the evidence of other factors affecting bank efficiency.

scholarly journals Measuring the competition and banking efficiency level: a study at four commercial banks in Indonesia

2021 ◽  
Vol 16 (1) ◽  
pp. 17-26
Author(s):  
Setyo Tri Wahyudi ◽  
Rihana Sofie Nabella ◽  
Kartika Sari
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Banking Industry ◽  
Banking System ◽  
Vital Role ◽  
Differentiated Products ◽  
Too Big To Fail ◽  
Analysis Model ◽  
Bank Efficiency ◽  
Banking Efficiency

The banking sector plays a vital role in the economy of each country. Banks are required to operate in a sound, efficient, and reliable manner in order to stimulate economic growth. To achieve that, a basic framework for the Indonesian banking system has been developed, known as the Indonesian Banking Architecture (IBA) aimed at strengthening the structure and enhancing the competitiveness of the banking industry. This study aimed to analyze the level of competition, the ability, and influence of the competition on banks efficiency, so banks can maintain the performance level and provide economic growth. This study used a quantitative approach with a panel regression analysis model. The results have shown that the banking industry in Indonesia tends to be monopolistic. The character of many sellers, differentiated products, sellers freely entering and leaving the market, as well as the presence of advertisement and product quality competitions were examined. Bank competition that leads to a monopolistic market structure stimulated banks to achieve higher profits and put bank projects and financing at high risk. Competition had a negative correlation with bank efficiency because competition encourages banks to focus on profit rather than efficiency, engage in risky financing/projects, and undertake high lending activities. Moreover, four big banks in Indonesia are in the “too big to fail” position. Banking regulators in Indonesia must maintain and produce reliable and stable banks to compete globally. AcknowledgementThe authors would like to thank all those who have contributed to the completion of this article, especially the leadership of the Department of Economics and the Faculty of Economics and Business, Brawijaya University, who provided facilitation for publication in reputable international journals.

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