Abstract
The purpose of this study is to examine and compare the financial performance of the three banking modes in Egypt: Islamic, conventional and mixed banks during the period 2003-2010. 13 banks are included in the study (i.e. 2 Islamic banks, 8 conventional banks, and 3 mixed banks). Multiple regression models are used to study the influence of both the internal bank-specific characteristics and the external macroeconomic environment on the performance of the three types of banks in Egypt. Return on assets (ROA) and return on equity (ROE) are employed to measure the performance of the three types of banks in Egypt. Moreover, a set of internal and external factors are considered as independent variables including; liquidity, capital adequacy, asset quality, operation efficiency, bank's size, GDP growth rate (GDP GR), and inflation rate. The findings reveal that operation efficiency has a significant negative impact on the three types of banks in Egypt, while bank's size and inflation rate have a significant influence merely on the performance of conventional banks. In addition, capital adequacy and asset quality have a positive significant influence on the performance of mixed banks. Furthermore, the comparison between financial performances of the three types of banks indicates that there is a significant difference between both ROA and ROE of Islamic banks and conventional banks, and the performance of conventional banks is better than the performance of Islamic banks in Egypt. On the other hand, there is no significant difference between the performance of Islamic banks and mixed banks, while there is a significant difference between ROA of conventional banks and mixed banks and no significant difference between ROE of conventional and mixed banks. The study also identifies the most significant indicators that contribute to assessing the performance of the three banking modes in Egypt.
Highlights
Over years, there have been numerous financial institutions acting as intermediators between the lenders and the borrowers of money
Table (14) reveals the following results: 1- The overall model is significant as the probability of f-statistic is less than 5%. 2- Return on assets (ROA) is affected by operation efficiency only as its corresponding p-value is less than 0.01 which means that these two variables are significant at 99%. 3- It is shown from regression model that when operation efficiency increases by 1%, ROA decreases by 3.7% at 99% level of confidence and fixing all other variables. 4- Adjusted R2 = 68.5% which means that the estimated model describes approximately 69% from the variations that happens in ROA. 5- Model diagnosis: a
Table (16) reveals the following results: 1- The overall model is significant as the probability of f-statistic is less than 5%. 2- Return on Equity (ROE) is affected by operation efficiency only as its corresponding p-value is less than 0.01 which means that this variable is significant at 99%. 3- It appears from the regression model that when operation efficiency increases by 1%, ROE decreases by 75% fixing all other variables and this result is significant at 99% level of confidence. 4- Adjusted R2 = 68.5% which means that the estimated model describes approximately 69% of the variations that happens in the ROE. 5- Model diagnosis: a
Summary
There have been numerous financial institutions acting as intermediators between the lenders and the borrowers of money. Major monetary organizations are entering new markets and offering diverse range of items and administrations to reinforce their essence and lift their productivity. Among such advancements is the presentation of Islamic banking since 1975 (Ariss, 2010). An expansive number of banking firms changed over a portion of their tasks from conventional practices by setting up Islamic windows or building up undeniable Islamic banks (Ariss, 2010). There are in excess of 430 Islamic Financial Institutions working in excess of 75 nations, including banks, Archives of Business Research (ABR)
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