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Efficiency Convergence in Islamic and Conventional Banks


Jones, Jill; Ongena, Steven; Pappas, Vasileios; Tsionas, Mike; Izzeldin, Marwan (2018). Efficiency Convergence in Islamic and Conventional Banks. SSRN n/a, University of Zurich.

Abstract

This paper examines how efficiency dynamics of Islamic and conventional banks compare and how they are converging across different countries. We employ both parametric and non-parametric methods to analyse a panel of Islamic and conventional banks from 23 countries during the period 1999 to 2014. Parametric methods (stochastic frontiers methods) shows that both steady state efficiency and the speed of convergence of Islamic and conventional banks are similar. A non-parametric framework (classification trees) identifies a varying degree of alignment between the Islamic and conventional banking model across countries, which could explain the plurality in conclusions in the Islamic/conventional bank efficiency debate. We find that the alignment between the two bank types is positively related to the country’s financial depth, transparency, economic stability and banking concentration. At the bank level, the alignment in the two banking systems is associated with higher income diversification, liquidity, profitability and financial stability.

Abstract

This paper examines how efficiency dynamics of Islamic and conventional banks compare and how they are converging across different countries. We employ both parametric and non-parametric methods to analyse a panel of Islamic and conventional banks from 23 countries during the period 1999 to 2014. Parametric methods (stochastic frontiers methods) shows that both steady state efficiency and the speed of convergence of Islamic and conventional banks are similar. A non-parametric framework (classification trees) identifies a varying degree of alignment between the Islamic and conventional banking model across countries, which could explain the plurality in conclusions in the Islamic/conventional bank efficiency debate. We find that the alignment between the two bank types is positively related to the country’s financial depth, transparency, economic stability and banking concentration. At the bank level, the alignment in the two banking systems is associated with higher income diversification, liquidity, profitability and financial stability.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:2018
Deposited On:04 Dec 2020 09:12
Last Modified:27 Jan 2022 03:30
Series Name:SSRN
ISSN:1556-5068
OA Status:Green
Free access at:Official URL. An embargo period may apply.
Publisher DOI:https://doi.org/10.2139/ssrn.2960018
Other Identification Number:merlin-id:19986

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