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Journal of Quantitative Economics

, Volume 17, Issue 3, pp 623–665 | Cite as

Conventional and Islamic Banks’ Performance in the Gulf Cooperation Council Countries; Efficiency and Determinants

  • Ihsen AbidEmail author
  • Mohamed Goaied
  • Mouldi Ben Ammar
Original Article
  • 92 Downloads

Abstract

This paper investigates the cost efficiency levels of the banking sectors of the Gulf Cooperation Council (GCC) countries for the period from 2001 to 2015 and provides a comparison of conventional and Islamic banks. We obtain measures of efficiency using a stochastic frontier model and the meta-frontier approach. The evidence demonstrates that Islamic banks are less efficient and have a weaker level of production technology than conventional banks. The cost efficiency of banks varies significantly across the six Gulf countries and over time. We adopt the results drawn from the meta-frontier model that allow to take into account the differences between the studied countries, and empirically examine the bank-specific, financial, macroeconomic, and political determinants of banking efficiency. The results provide evidence of the differential effects of the selected variables on the efficiency of conventional and Islamic banks. These variables affect the performance of the two types of banks in different ways and with different magnitudes.

Keywords

GCC countries Conventional and Islamic banks Meta-frontier approach Cost efficiency Determinants of bank performance 

JEL Classification

C23 C61 D21 G21 

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© The Indian Econometric Society 2018

Authors and Affiliations

  1. 1.International School of BusinessNorth American Private UniversitySfaxTunisia
  2. 2.College of Business and EconomicsQatar UniversityDohaQatar

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