Investigation of the impact of market power on the bank performance and efficiency in Islamic and Conventional banks in GCC

مقال فى مجلة

2019

تم النشر فى: doi.org/10.15640/jibf.v7n2a1

This paper examines the impact of the market power on banks performance and efficiency in Islamic and Conventional banks in the GCC banking sector over the period 2010-2016. We investigate whether the market powers are directly linked with the banking efficiency and profitability and have constructive impact on the banking operations. We applied two stages for measuring the banking performance under the impact of market powers. In the first stage, we examine the banking performance by measuring the efficiency and profitability of the banks where we compute the ratios of various expenses to the assets of banks. Also, we examine the data across Islamic and conventional banks and across GCC countries of various sizes to bring out the impact of market powers. Then we assess the impact of market forces to banking profitability and efficiency. The results reveal that there are positive and significant impacts of market forces on the operating performance and efficiency of the banking industry in GCC. In addition, we find banks with large size and high capitalization achieves high performance and efficiency levels. Also, we find that low liquidity ratio of banks increases banks profitability and efficiency. We further uncover high market power levels in Islamic banks compared to conventional banks in GCC banking systems. However, the competition levels in Islamic banks compared to conventional banks across countries are mixed. Overall, the results provide evidence that banks profitability and efficiency increase with the market power levels. Results implication indicates that Islamic banks must improve their financial activities and raising the level of lending.

• اسم الناشر: American Research Institute for Policy Development
• رقم المجلد: 7
• رقم الانشاء: 2
• مجلة/صحيفة: Journal of Islamic Banking and Finance
• الصفحات: 1-13