Abstract
This paper studies the technical efficiency of Saudi banking sector using stochastic frontier model. A sample of 12 banks over the period 2000 - 2011 is selected to investigate their technical efficiencies in mobilizing deposits, allocating investments and generating income. The banks are categorized as Saudi-owned banks, Saudi - foreign owned banks and Islamic banks. The findings show some consistent pattern of these bank types; and there exist significant disparities among the banks in terms of technical efficiency. The banque Saudi Fransi stands out as a benchmark for the industry, and it is a Saudi -foreign owned bank type. The Saudi owned bank type has shown fluctuating performance during the period; and the Islamic bank type is not significantly different from Saudi-owned bank type.
Highlights
This paper investigates the performance of the Saudi banking industry, which consist of Saudi-owned, Saudi-foreign-owned and Islamic banks
If input are increased by certain percentage and the output increases by the same percentage, the firm faces constant return to scale (CRS); it faces variable return to scale (VRS) when the output increases by variable percentages
Than for each bank a percentage is calculated as how many times it falls under each category
Summary
This paper investigates the performance of the Saudi banking industry, which consist of Saudi-owned, Saudi-foreign-owned and Islamic banks. From its capital and labour, the banking industry mobilizes deposits, and create loan, and generate income In this process, the industry faces two major efficiency issues which are input efficiency and output efficiency. Saudi banking industry is highly liquid and rich in financial resources, and it has so far weathered off the recent world financial crises This raises three major questions for research and investigation: For example, has the Saudi banking industry become a natural monopoly due to its intertwined structural ownership? The second question relates to the ownership structure but in times of Saudi-owned and Saudi-foreign owned structures Even in the mid of world financial crisis, Saudi banking industry showed impressive growth results and expanded lending activities even at the time when there were adverse economic conditions all around the world
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
