A Bootstrap Data Envelopment Analysis (BDEA) approach in Islamic banking sector: A method to strengthen efficiency measurement

Abstract

This study applied the Bootstrapping Data Envelopment Analysis (BDEA) approach to investigate the efficiency level of twelve Islamic banks in Malaysia. BDEA approach has been employed to resolve the uncertainty issue of traditional DEA measurement practice as well as small sample problem. The empirical analysis showed that in measuring Islamic banks' efficiency, there is a bias issue that BDEA approach has been able to trace, thereby providing more accurate and reliable efficiency results. We believe that this approach, not only is important for a more precise efficiency measurement but also compatible with Islamic banking concepts that differ substantially in objectives and operations from those of conventional banks. In general, this study has contributed to the efficiency study literature where the issue of accuracy and bias in examining efficiency level is crucial.