Johnes, Jill and Izzeldin, Marwan and Pappas, Vasileios and Alexakis, Christos (2019) Performance and Productivity in Islamic and Conventional Banks : Evidence from the Global Financial Crisis. Economic Modelling, 79. pp. 1-14. ISSN 0264-9993
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Abstract
We assess the performance and productivity of Islamic and conventional banks using financial ratios, a two- and a four-component meta-frontier Malmquist productivity index (MPI). We focus on the relatively homogenous GCC region over the 2006-2012 period that covers the global financial crisis. We find that Islamic banks exhibit worse cost and profit performance but are on a par with regards to revenue performance compared to the conventional ones. The components of the meta-frontier MPI suggest that the technology of conventional banks improves markedly in years leading to the financial crisis and declines thereafter. Islamic banks show a similar but more muted pattern. By contrast, the pronounced within-Islamic bank group variation in technical efficiency and technology suggest that Islamic banks are quite heterogeneous as a group. Overall, the MPI analysis suggests that the two bank types are more aligned following the global financial crisis. Policy implications are subsequently discussed.