<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The purpose of the present paper is to examine the revenue efficiency of the Malaysian Islamic banking sector. The study also seeks to investigate the potential internal (bank specific) and external (macroeconomic) determinants that influence the revenue efficiency of Malaysian domestic Islamic banks. We employ the whole gamut of domestic and foreign Islamic banks operating in the Malaysian Islamic banking sector during the period of 2006 – 2015. The level of revenue efficiency is computed by using the Data Envelopment Analysis (DEA) method. Furthermore, we employ a panel regression analysis framework based on the Ordinary Least Square (OLS) method to examine the potential determinants of revenue efficiency. The results indicate that the level of revenue efficiency of Malaysian domestic Islamic banks is lower compared to their foreign Islamic bank counterparts. We find that bank market power, liquidity, and management quality significantly influence the improvement in revenue efficiency of the Malaysian domestic Islamic banks during the period under study. This study provides for the first time empirical evidence that covering all three efficiency concepts, namely cost, revenue, and profit efficiency is completely missing from the literature. By calculating these efficiency concepts, we can observe the efficiency levels of the domestic and foreign Islamic banks. In addition, by comparing both cost and profit efficiency, we can identify the influence of the revenue efficiency on the banks’ profitability.</p></abstract>

The purpose of the present paper is to examine the revenue efficiency of the Malaysian Islamic banking sector. The study also seeks to investigate the potential internal (bank specific) and external (macroeconomic) determinants that influence the revenue efficiency of Malaysian domestic Islamic banks. We employ the whole gamut of domestic and foreign Islamic banks operating in the Malaysian Islamic banking sector during the period of 2006 – 2015. The level of revenue efficiency is computed by using the Data Envelopment Analysis (DEA) method. Furthermore, we employ a panel regression analysis framework based on the Ordinary Least Square (OLS) method to examine the potential determinants of revenue efficiency. The results indicate that the level of revenue efficiency of Malaysian domestic Islamic banks is lower compared to their foreign Islamic bank counterparts. We find that bank market power, liquidity, and management quality significantly influence the improvement in revenue efficiency of the Malaysian domestic Islamic banks during the period under study. This study provides for the first time empirical evidence that covering all three efficiency concepts, namely cost, revenue, and profit efficiency is completely missing from the literature. By calculating these efficiency concepts, we can observe the efficiency levels of the domestic and foreign Islamic banks. In addition, by comparing both cost and profit efficiency, we can identify the influence of the revenue efficiency on the banks’ profitability.

Bank Efficiency in Malaysia a DEA Approach

Taylor’s Business School, Faculty of Business and Law

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Bank Efficiency in Malaysia a DEA Approach"}

The purpose of the present paper is to examine the revenue efficiency of the Malaysian Islamic banking sector. The study also seeks to investigate the...

Bank Efficiency in Malaysia a DEA Approach

Data publikacji: 03 sty 2019

Zakres stron: 133 - 162

DOI: https://doi.org/10.2478/jcbtp-2019-0007

Słowa kluczowe
Islamic Banks, Revenue Efficiency, Data Envelopment Analysis, Panel Regression Analysis, Domestic, Foreign

© 2019 Fakarudin Kamarudin et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Bank Efficiency in Malaysia a DEA Approach

Data publikacji: 03 sty 2019

Zakres stron: 133 - 162

DOI: https://doi.org/10.2478/jcbtp-2019-0007

Słowa kluczoweIslamic Banks, Revenue Efficiency, Data Envelopment Analysis, Panel Regression Analysis, Domestic, Foreign

© 2019 Fakarudin Kamarudin et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Słowa kluczowe
Islamic Banks, Revenue Efficiency, Data Envelopment Analysis, Panel Regression Analysis, Domestic, Foreign