Efficiency of the Islamic Banking Sector: Evidence from Two-Stage DEA Double Frontiers Analysis
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Date
2023-03
Open Access Location
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
MDPI (Basel, Switzerland)
Rights
(c) 2023 The Author/s
CC BY 4.0
CC BY 4.0
Abstract
This paper examines the multi-dimensional efficiency of the Islamic banking sector and its determinants, including the impacts of the COVID-19 pandemic. To do that, we use a novel approach of two-stage data envelopment analysis (DEA) double frontiers to evaluate the overall efficiency of 79 Islamic banks across 16 countries (2005–2020). In the first-stage analysis, we found that the Islamic banking sector experienced an increasing trend in its efficiency and performance, even during the recent pandemic, although it varied across banks and countries. Our empirical results of the second-stage analysis further showed that economic development can help countries both withstand the recent pandemic and improve the efficiency and performance of their (Islamic) banking system. This, in turn, could help speed up the recovery process of the global economy. Since there is evidence that the Islamic banking sector is resilient to the COVID-19 pandemic, it is expected that this sector will be a driving force of such recovery.
Description
Keywords
two-stage DEA double frontiers, Islamic banks, COVID-19, efficiency, determinants
Citation
Mai XTT, Nguyen HTN, Ngo T, Le TDQ, Nguyen LP. (2023). Efficiency of the Islamic Banking Sector: Evidence from Two-Stage DEA Double Frontiers Analysis. International Journal of Financial Studies. 11. 1.