{"title":"Banking efficiency, ownership types, and operations: A quasi-natural experiment of conventional and Islamic banks","authors":"Mohan Fonseka , Omar Al Farooque","doi":"10.1016/j.qref.2024.101882","DOIUrl":null,"url":null,"abstract":"<div><p>This study examines the banking efficiency of different ownership types and operations in an emerging market in South Asia. It further explores the moderating effect of Islamic banking operations on such relationships. The effects of banking regulatory developments on banking efficiency are also examined through a quasi-natural experiment approach. Using 533 banking unit observations of banks for FY 2002/2003 to 2017/2018 period, and applying the data envelopment analysis (DEA) method for banking efficiency and Tobit regression, the findings document that the banking efficiency of the state-owned conventional banks outperforms privately-owned domestic banks, as well as conventional domestically owned banks (state-owned and privately-owned banks) outperforms the foreign-owned banks. Again, the banking efficiency outperformance of the conventional banking operation over the Islamic banking operation is found. However, the outperformance of conventional state-owned banks diminishes with the moderation of Islamic banking operations. Additionally, the quasi-natural experiment with difference-in-difference (DID) regression result reveals that the banking efficiency of Islamic banks and conventional state-owned banks has improved during the post-regulatory period and reduced the efficiency gap between them (in favor of conventional banks). However, the banking efficiency of conventional state-owned banks offering Islamic banking services has diminished in the post-regulatory period. These findings remain robust during the global financial crisis (GFC) and non-GFC periods. Overall, the results add a new dimension to the banking efficiency and regulatory development research for the policymakers and regulators in the financial services sector.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":2.9000,"publicationDate":"2024-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Quarterly Review of Economics and Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1062976924000887","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
This study examines the banking efficiency of different ownership types and operations in an emerging market in South Asia. It further explores the moderating effect of Islamic banking operations on such relationships. The effects of banking regulatory developments on banking efficiency are also examined through a quasi-natural experiment approach. Using 533 banking unit observations of banks for FY 2002/2003 to 2017/2018 period, and applying the data envelopment analysis (DEA) method for banking efficiency and Tobit regression, the findings document that the banking efficiency of the state-owned conventional banks outperforms privately-owned domestic banks, as well as conventional domestically owned banks (state-owned and privately-owned banks) outperforms the foreign-owned banks. Again, the banking efficiency outperformance of the conventional banking operation over the Islamic banking operation is found. However, the outperformance of conventional state-owned banks diminishes with the moderation of Islamic banking operations. Additionally, the quasi-natural experiment with difference-in-difference (DID) regression result reveals that the banking efficiency of Islamic banks and conventional state-owned banks has improved during the post-regulatory period and reduced the efficiency gap between them (in favor of conventional banks). However, the banking efficiency of conventional state-owned banks offering Islamic banking services has diminished in the post-regulatory period. These findings remain robust during the global financial crisis (GFC) and non-GFC periods. Overall, the results add a new dimension to the banking efficiency and regulatory development research for the policymakers and regulators in the financial services sector.
期刊介绍:
The Quarterly Review of Economics and Finance (QREF) attracts and publishes high quality manuscripts that cover topics in the areas of economics, financial economics and finance. The subject matter may be theoretical, empirical or policy related. Emphasis is placed on quality, originality, clear arguments, persuasive evidence, intelligent analysis and clear writing. At least one Special Issue is published per year. These issues have guest editors, are devoted to a single theme and the papers have well known authors. In addition we pride ourselves in being able to provide three to four article "Focus" sections in most of our issues.