Abstract
Purpose: This study aims to compare the governance, risk-taking, and efficiency of pure Islamic Banks between Pakistan and Malaysia. Design: Total 9 years of data from 2009 to 2017 used for analysis. Data Envelopment Analysis (DEA) has been used for the measurement of Islamic bank's efficiency. Efficiency has been measured by (Technical Efficiency, Pure Technical Efficiency, and Scale Efficiency). Z-score has been used to measure risk-taking. Results: This comparative study shows that Shariah Supervisory Board has a significant impact only on Malaysian Islamic Banks with technical, pure technical, and scale efficiency. At the same time, board independence has a meaningful relationship with the efficiency of IBs of both countries. Board meetings significantly impact Pakistani Banks' pure technical efficiency while it substantially affects Malaysian banks' technical efficiency. Results also show that risk-taking has a significant negative impact on the efficiency of both countries. Implications: Pakistani Islamic banks should focus more on Shariah Supervisory Boards to develop the Islamic Banking system in Pakistan because it significantly impacts the Efficiency of Malaysian IBs.
Highlights
Banking efficiency is the combination of all these strategies
We use three proxies of efficiency (Technical efficiency, Pure technical efficiency, and scale efficiency). This comparative study shows that Shariah supervisory board has a significant impact only on Malaysian Islamic banks with technical, pure specialized, and scale efficiency
CEO duality has a significant impact on the efficiency of only Malaysian banks
Summary
Banking efficiency is the combination of all these strategies. Banks are aware of their all resources and select such a variety that offers maximum output with minimum input. Banks that adopt such type of combination for their resources become more efficient than others. It helps to become more efficient for all kinds of competition in the advanced technological era. The measurement of banks' efficiency includes calculating their efficiency scores under efficiency limit through non-parametric or parametric tactics. Data Envelopment Analysis (DEA) is the most common method which is used to measure banking efficiency. DEA is based on two basic models. The first one is the CCR model, which has been established by
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