TY - JOUR
T1 - Efficiency convergence in Islamic and conventional banks
AU - Izzeldin, Marwan
AU - Johnes, Jill
AU - Ongena, Steven
AU - Pappas, Vasileios
AU - Tsionas, Mike
N1 - Funding Information:
The authors are grateful to participants in the 4th Islamic Banking and Finance Conference (Lancaster), the 5th International Conference of the Financial Engineering and Banking Society (Nantes), and the INFINITI Conference (Dublin) for valuable suggestions. The authors also want to thank Konstantinos Baltas, Iftekhar Hassan and Gerry Steele for their many helpful comments. The authors acknowledge academic support from the GulfOne Lab for Computational and Economic Research (GOLCER). Ongena acknowledges financial support from ERC ADG 2016 - GA 740272 lending.
Funding Information:
The authors are grateful to participants in the 4th Islamic Banking and Finance Conference (Lancaster), the 5th International Conference of the Financial Engineering and Banking Society (Nantes), and the INFINITI Conference (Dublin) for valuable suggestions. The authors also want to thank Konstantinos Baltas, Iftekhar Hassan and Gerry Steele for their many helpful comments. The authors acknowledge academic support from the GulfOne Lab for Computational and Economic Research (GOLCER). Ongena acknowledges financial support from ERC ADG 2016 - GA 740272 lending.
Publisher Copyright:
© 2020 The Author(s)
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2021/1/1
Y1 - 2021/1/1
N2 - 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.
AB - 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.
KW - Bank efficiency
KW - Random parameter estimation
KW - Conditional-convergence
KW - Islamic banks
KW - Classification trees
UR - http://www.scopus.com/inward/record.url?scp=85099135730&partnerID=8YFLogxK
U2 - 10.1016/j.intfin.2020.101279
DO - 10.1016/j.intfin.2020.101279
M3 - Article
VL - 70
JO - Journal of International Financial Markets, Institutions and Money
JF - Journal of International Financial Markets, Institutions and Money
SN - 1042-4431
M1 - 101279
ER -
