FINANCIAL EFFICIENCY ANALYSIS OF SELECTED ISLAMIC AND CONVENTIONAL BANKS OPERATING IN THE GLOBAL FINANCIAL SYSTEM: 2017-2021
Abstract
The aim of this study is to analyze the financial efficiency levels of Islamic and conventional banks operating in the international financial system, determine their levels of competitiveness, and provide recommendations to bank managers and policymakers based on the findings. In this study, the financial efficiency of 9 Islamic and 9 conventional banks selected based on "The Banker" magazine's "Top 1000 Banks in the World" report for the period 2017-2021 is evaluated using the Data Envelopment Analysis (DEA) method. Additionally, technical efficiency is measured using the input-oriented BCC-I model. Over a five-year period, it was observed that the efficiencies of Islamic and conventional banks yielded similar results. Out of the four banks that were inefficient during the analysis period, two were Islamic (Abu Dhabi Islamic Bank and Kuwait Finance House) and two were conventional (Bank of America Corp., HSBC Holding PLC). The primary reason for the inefficiency of these banks is their inability to utilize resources effectively. To enhance financial efficiency, it is crucial for inefficient banks to identify resource wastage and adjust their inputs relative to benchmark banks operating at the production frontier. Additionally, Islamic and conventional banks in the global financial system should also pay attention to their scale sizes. This study provides an in-depth comparison and comprehensive evaluation of Islamic and conventional banks in the financial sector.
Keywords
Islamic bank , Conventional bank , Efficiency , Data Envelopment Analysis
Kaynakça
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