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Comparing the intertemporal efficiency of Islamic banks in Indonesia and Malaysia

Rani, Lina Nugraha and Kassim, Salina (2020) Comparing the intertemporal efficiency of Islamic banks in Indonesia and Malaysia. Journal of Islamic Monetary Economics and Finance (JIMF), 6 (4). pp. 861-894. ISSN 2460-6146 E-ISSN 2460-6618

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Abstract

This study aims to measure and compare the intertemporal efficiency of Islamic banks in Indonesia and Malaysia using data envelopment analysis (DEA) together with window (intertemporal) analysis for the period 2012–2018 and applying an intermediation approach. Window analysis is used to indicate the stability of efficiency over the study period. The findings show that the intertemporal technical efficiency (TE) of Islamic banks in Indonesia was 77.4% with stability score of 0.034, which was significantly more efficient and more stable than Malaysian banks at 75.1% with stability score of 0.169. Moreover, the the intertemporal pure technical efficiency (PTE) of Islamic banks in Indonesia was 91.7% with stability score 0.020, which was also significantly more efficient and more stable than Malaysian banks at 88.0% PTE and stability score of 0.161. In contrast, the intertemporal scale efficiency (SE) of Islamic banks in Indonesia was 84.5%, slightly lower than that of Malaysian banks at 85.3% but not significantly different. PTE improvement has contributed to TE improvement, while SE has not reached an optimal level. Comparison to previous results also showed that since the global financial crisis the PTEs of Islamic banks in Indonesia and Malaysia have improved while SEs have worsened. Therefore, efforts to improve SE by expanding the size of Islamic banks to reach optimum economies of scale are urgently needed.

Item Type: Article (Journal)
Additional Information: 4600/87380
Uncontrolled Keywords: Efficiency, Islamic banks, Indonesia, Malaysia
Subjects: H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Institute of Islamic Banking & Finance (IIiBF)
Depositing User: Prof. Dr. Salina Kassim
Date Deposited: 30 Dec 2020 23:02
Last Modified: 30 Dec 2020 23:02
URI: http://irep.iium.edu.my/id/eprint/87380

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