Abstract
Considering the recent shrinkage in Islamic banks’ profitability in Bangladesh, this study investigated whether these banks are less efficient than the conventional and mixed banks. Using 250 firm-year observations from 38 private commercial banks for the years from 2011 to 2017 and estimating operational efficiency through the Data Envelopment and Stochastic Frontier Analyses, we found robust evidence that Islamic banks are less efficient than the conventional and mixed banks. In additional analysis, it was found that the lower efficiency of Islamic banks was driven by their non-investment income. A significant negative shift in Islamic banks’ efficiency was evident in the most recent years compared to the earliest periods in our sample window. These findings helped us explain why the relative profitability of Islamic banks has declined recently. We suggest that Islamic banks’ management pay more attention to their portfolio of non-investment products and services in order to remain competitive in the fast-growing banking landscape in Bangladesh.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.