The Structure-Performance Nexus and Efficiency in the Malaysian Banking Sector
The debate on whether Islamic banks (IBs), given their unique attributes and business model, outperform their conventional counterparts in the context of a dual banking system has been ignited, with no conclusive evidence yet reached. This study conducts a comparative empirical analysis of performan...
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| Format: | Article |
| Language: | English |
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İLKE İlim Kültür Eğitim Vakfı
2023-08-01
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| Series: | Türkiye İslam İktisadı Dergisi |
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| Online Access: | https://tujise.org/content/6-issues/21-volume-10-issue-2/4-the-structure-performance-nexus-and-efficiency-in-the-malaysian-banking-sector/tujise_10.2-a3878.pdf |
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| author | Rafik Harkati Syed Musa Alhabshi Salina Kassim |
| author_facet | Rafik Harkati Syed Musa Alhabshi Salina Kassim |
| author_sort | Rafik Harkati |
| collection | DOAJ |
| description | The debate on whether Islamic banks (IBs), given their unique attributes and business model, outperform their conventional counterparts in the context of a dual banking system has been ignited, with no conclusive evidence yet reached. This study conducts a comparative empirical analysis of performance between IBs and conventional banks (CBs) in the dual banking system of Malaysia. It investigates whether banks’ performance in Malaysia has been driven by market structure or efficiency. It also investigates whether bank managers have been demotivated and settled for a quiet life due to market power or have been aggressive due to the search for efficiency and market share. Further, it investigates how concentration within one sector influences its counterpart’s performance. Generalised Method of Moments (GMM) and Data Envelopment Analysis (DEA) techniques are employed. The findings revealed that Efficient Structure (FS) and Structure-Conduct-Performance (SCP) hypotheses are rejected for all categories. The Quiet Life Hypothesis (QLH) is accepted for CBs, implying persistency of profits and validity of the Relative Market Power (RMP) hypothesis; however, it is rejected for IBs, implying IBs’ pursuit of market power. Islamic banking sector structure showed no influence on the performance of both IBs and CBs, while CBs negatively influenced the performance of both types of banks and the sector at large. Policy markets can capitalise on the findings, regulators, and banks’ managers to promote performance, efficiency, and set merger policies. |
| format | Article |
| id | doaj-art-c66f545b5ebe4e5e8c873b1ac2df182d |
| institution | Kabale University |
| issn | 2148-3809 |
| language | English |
| publishDate | 2023-08-01 |
| publisher | İLKE İlim Kültür Eğitim Vakfı |
| record_format | Article |
| series | Türkiye İslam İktisadı Dergisi |
| spelling | doaj-art-c66f545b5ebe4e5e8c873b1ac2df182d2025-02-03T11:24:46ZengİLKE İlim Kültür Eğitim VakfıTürkiye İslam İktisadı Dergisi2148-38092023-08-01102739810.26414/A3878The Structure-Performance Nexus and Efficiency in the Malaysian Banking SectorRafik Harkati0https://orcid.org/0000-0002-8339-1806Syed Musa Alhabshi1https://orcid.org/0000-0001-8274-9944Salina Kassim2https://orcid.org/0000-0002-7514-8750 International Islamic University MalaysiaInternational Islamic University Malaysia International Islamic University MalaysiaThe debate on whether Islamic banks (IBs), given their unique attributes and business model, outperform their conventional counterparts in the context of a dual banking system has been ignited, with no conclusive evidence yet reached. This study conducts a comparative empirical analysis of performance between IBs and conventional banks (CBs) in the dual banking system of Malaysia. It investigates whether banks’ performance in Malaysia has been driven by market structure or efficiency. It also investigates whether bank managers have been demotivated and settled for a quiet life due to market power or have been aggressive due to the search for efficiency and market share. Further, it investigates how concentration within one sector influences its counterpart’s performance. Generalised Method of Moments (GMM) and Data Envelopment Analysis (DEA) techniques are employed. The findings revealed that Efficient Structure (FS) and Structure-Conduct-Performance (SCP) hypotheses are rejected for all categories. The Quiet Life Hypothesis (QLH) is accepted for CBs, implying persistency of profits and validity of the Relative Market Power (RMP) hypothesis; however, it is rejected for IBs, implying IBs’ pursuit of market power. Islamic banking sector structure showed no influence on the performance of both IBs and CBs, while CBs negatively influenced the performance of both types of banks and the sector at large. Policy markets can capitalise on the findings, regulators, and banks’ managers to promote performance, efficiency, and set merger policies.https://tujise.org/content/6-issues/21-volume-10-issue-2/4-the-structure-performance-nexus-and-efficiency-in-the-malaysian-banking-sector/tujise_10.2-a3878.pdfperformancestructureefficiencymarket powerquiet lifedual banking system |
| spellingShingle | Rafik Harkati Syed Musa Alhabshi Salina Kassim The Structure-Performance Nexus and Efficiency in the Malaysian Banking Sector Türkiye İslam İktisadı Dergisi performance structure efficiency market power quiet life dual banking system |
| title | The Structure-Performance Nexus and Efficiency in the Malaysian Banking Sector |
| title_full | The Structure-Performance Nexus and Efficiency in the Malaysian Banking Sector |
| title_fullStr | The Structure-Performance Nexus and Efficiency in the Malaysian Banking Sector |
| title_full_unstemmed | The Structure-Performance Nexus and Efficiency in the Malaysian Banking Sector |
| title_short | The Structure-Performance Nexus and Efficiency in the Malaysian Banking Sector |
| title_sort | structure performance nexus and efficiency in the malaysian banking sector |
| topic | performance structure efficiency market power quiet life dual banking system |
| url | https://tujise.org/content/6-issues/21-volume-10-issue-2/4-the-structure-performance-nexus-and-efficiency-in-the-malaysian-banking-sector/tujise_10.2-a3878.pdf |
| work_keys_str_mv | AT rafikharkati thestructureperformancenexusandefficiencyinthemalaysianbankingsector AT syedmusaalhabshi thestructureperformancenexusandefficiencyinthemalaysianbankingsector AT salinakassim thestructureperformancenexusandefficiencyinthemalaysianbankingsector AT rafikharkati structureperformancenexusandefficiencyinthemalaysianbankingsector AT syedmusaalhabshi structureperformancenexusandefficiencyinthemalaysianbankingsector AT salinakassim structureperformancenexusandefficiencyinthemalaysianbankingsector |