Efficiency measurement of Islamic and conventional banks in Saudi Arabia:an empirical and comparative analysis

Saudi Arabia, beside Malaysia and many other Muslim countries, is one of those countries where Islamic and conventional banking operate in parallel. Over the last decade, the country’s banking industry is growing at rapid pace that accounts for the largest share in GCC. The present study measures and compares the performance of Saudi conventional and Islamic banking industry and identifies the areas where the strategic measures are required to improve the banking performance. It applies non-parametric Data Envelopment Analysis (DEA) for the data from 2008-2016 of Saudi banking industry and provides comprehensive empirical results at individual bank vis-a-vis industry levels. The empirical results demonstrate a mix trend among the banks in achieving technical, pure technical and scale efficiency. It is observed that with the common pledge to expanding market share and performance, both conventional and Islamic banks have been successful in improving their levels of efficiency. At individual bank level, Al-Rajhi is the only bank that has achieved the highest score in terms of technical, pure technical and scale efficiency, while in the conventional banking group, both Saudi Hollandi and National Commercial banks are found on the top position. Despite the growth of incomes and deposits of entire banking industry in Saudi Arabia, this study particularly recommends for the Islamic banks to redirect their short term and long-term marketing strategies and to focus on improving their management skills at the branch level

The Value-Relevance Of Internet Web Traffic And Revenue On Top Arab Banks Comparative Efficiency Performances

The comparative efficiency performances of the top Middle East Arab banks are measured using Data Envelopment Analysis (DEA) and Principal Components Factor Analysis (PCFA).  Cross-sectional data are used from Bankscope and the recently constructed and publically available web metrics, Alex.com, for 2008.   This paper identifies the ‘best practices’ of banks associated with measures of internet web traffic and revenue outputs.  Results identify large disparities between Arab banks’ comparative efficiency performances.  The highest technically efficient scoring banks were not necessarily the larger banks and banks that were efficient were not necessarily profitable.  No significant relationship was detected between large banks that are efficient at generating website visits and those that are efficient at generating revenues.  Smaller banks revealed more evidence of comparative efficiency performance towards generating website traffic output.  From a policy perspective, this study highlights the importance of encouraging increased efficiency throughout the banking industry in the Arab world, particularly in the area of internet banking.  It further reveals the state of some electronic data availability and transparency in the MENA region

A dynamic network DEA model for accounting and financial indicators: A case of efficiency in MENA banking

Middle East and North Africa (MENA) countries present a banking industry that is well-known for regulatory and cultural heterogeneity, besides ownership, origin, and type diversity. This paper explores these issues by developing a Dynamic Network DEA model in order to handle the underlying relationships among major accounting and financial indicators. Firstly, a relational model encompassing major profit sheet, balance sheet, and financial health indicators is presented under a dynamic network structure. Subsequently, the dynamic effect of carry-over indicators is incorporated into it so that efficiency scores can be properly computed for these three substructures. The impact of contextual variables related to bank ownership, its type, and whether or not it has undergone a previous merger and acquisition process is tested by means of a stochastic non-linear model solved by differential evolution, which combines bootstrapped Simplex, Tobit, Beta, and Simar and Wilson truncated regression results. The results reveal that bank type, origin, and ownership impact efficiency levels differently in terms of profit sheet, balance sheet, and financial health indicators, although the impact of culture and regulatory barriers seem to prevail at the country level

Time-varying Predictability in Crude Oil Markets: The Case of GCC Countries

This paper uses a time-varying parameter model with generalized autoregressive conditional heteros-cedasticity effects to examine the dynamic behavior of crude-oil prices for the period 1997-2008. Using data from four countries of the Gulf Cooperation Council, we find evidence of short-term pre-dictability in oil-price changes over time, except for several short sub-periods. However, the hypothe-sis of convergence towards weak-form informational efficiency is rejected for all markets. In addition, we explore the possibility of structural breaks in the time-paths of the estimated predictability indices and detect only one breakpoint, for the oil markets in Qatar and United Arab Emirates. Our empirical results therefore call for new empirical research to further gauge the predictability characteristics and the determinants of oil-price changes.

Determining liquidity risk, profitability and cost efficiency of Islamic banks in selected OIC countries

Liquidity risk in banks is a major issue following the 2008 Global Financial Crisis and 2014 oil price fall. The absence of Shariah-compliant liquidity instruments also accentuate liquidity problems in Islamic banks. The banks also face cost efficiency issues in addition to liquidity risk that affect their profitability. The main objective of this study is to examine liquidity risk determinants of Islamic banks in ten countries from Organization of Islamic Co-operation comprising Bahrain, Indonesia, Iran, Kuwait, Malaysia, Pakistan, Saudi Arabia, Sudan, Turkey and United Arab Emirate. Profit and Loss Sharing (PLS) contract and profitability were studied as mediators to explain the process through which relationship between liquidity risk and cost efficiency is affected. The study uses data of banks operating in dual and fully Islamic banking regulatory environments. Generalized Method of Moments was employed on 85 Islamic banks over 2005 to 2016 study period. The results show that cost efficiency and profitability ratios, Capital Adequacy Ratio and PLS are significantly related to liquidity risk. Similarly, Gross Domestic Product, Money Supply and inflation have significant influence on liquidity risk. It further highlights that profitability does mediates but PLS contract does not mediates the relationship between liquidity risk and cost efficiency. The implications of the results are that bank management, government and regulatory bodies of Islamic banks to manage the significant factors influencing liquidity risk effectively because they have direct impact on the banks’ cost efficiency and profitability. This study contributes new findings in terms of reaffirming the reluctance of Islamic banks to use PLS contract since it increases liquidity risk. It is therefore recommended that the practitioners and policy makers to examine closely that PLS contract should be backed by long term capital to mitigate liquidity risk. This will ensure greater profitability of Islamic banks in the dual banking environment

The Efficiency Cost of the Kafala in Dubai: A Stochastic Frontier Analysis

The Kafala (or sponsorship) system is the key instrument behind the economic development of the United Arab Emirates (UAE) and most Middle East economies. The system governs both labor migration and foreign investment by assigning a native-UAE sponsor to each migrant worker and each foreign investor. Sponsors enjoy significant command over these factors and extract sizable economic rents. Firms in free-zones, in contrast, are exempt from the Kafala system. Therefore, they provide an appropriate counterfactual to study the effect of policy regulations on technical efficiency. Using a representative sample of 600 firms of Dubai we estimate stochastic frontier models to identify and compare the degree of technical inefficiency between firms operating under the Kafala system and those in free zones. Our results suggest that on average technical inefficiency resulting from the Kafala amounts to 6.6% of total costs (or 11% of profits). Inefficiency is also greater among firms in Main Dubai in all economic sectors.Labor sponsorship (Kafala), technical inefficiency, economic rents

Analyzing Listed Indonesian Securities Companies’ Performance Using Data Envelopment Analysis

This study attempts to investigate the sensitivity of Data Envelopment Analysis (DEA) relative efficiencies to various inputs and output variable combinations measured for the year 2008 of the eight securities companies listed in Indonesia Stock Exchange (IDX), modeling performance measurement and to benchmark the efficient companies against the non-efficient companies. The results suggest that  PT. HD Capital Tbk, PT. Panin Sekuritas Tbk and PT. Trimegah Securities Tbk are 100% efficient in both global technical efficiency and pure technical efficiency amid the enduring global financial crisis.   The features of efficient peer companies make them very useful as role models that inefficient companies can emulate to improve their performance

Salford postgraduate annual research conference (SPARC) 2012 proceedings

These proceedings bring together a selection of papers from the 2012 Salford Postgraduate Annual Research Conference (SPARC). They reflect the breadth and diversity of research interests showcased at the conference, at which over 130 researchers from Salford, the North West and other UK universities presented their work. 21 papers are collated here from the humanities, arts, social sciences, health, engineering, environment and life sciences, built environment and business

SOME CONSIDERATIONS FOR IMPROVEMENT ROMANIAN TAXATION

The two terms, improvement and modernization are increasingly used to analyze tax issues, because the trend is towards ensuring optimal in terms of taxation and tax settlement to the criteria of normality, so that it becomes a key component of economic and social life of any nation. Through this article, we try to address some aspects to be taken into account when it comes to improving a tax system or tax activity, especially for the situation in Romania.improvement, optimal taxation, efficiency, fiscal management, fiscal rules