Abstract

This paper is conducted to compare the determinants of profitability of the domestic and foreign Islamic banks operating in Malaysia. The Generalized Least Square (GLS) is employed with unbalanced panel data on seventeen Islamic banks, using quarterly data for the period of 2007 to 2010. In order to find out the differences in the profitability determinants, the sample of banks is divided into two sub-samples (domestic and foreign). The results reveal that domestic Islamic banks are more profitable than foreign Islamic banks. The results also show that the profitability determinants of domestic banks are different from those of foreign banks. The overhead expenses, loans, efficiency, gross domestic product growth rate and bank size have a significant effect in determining banks’ profitability, in which case applicable to the domestic banks only. In turn, the gross domestic product per capita has a significant effect in determining banks’ profitability of only the foreign banks. The study finds that, deposits, capital and reserves, inflation and banks’ age have a significant effect in determining banks’ profitability of both domestic and foreign banks. Meanwhile, liquidity and concentration are not able to explain the variability of domestic and foreign Islamic banks’ profitability. The findings indicate that the profitability of domestic banks is affected by the global financial crisis while, the profitability of foreign banks is not affected.

Abstract

This paper is conducted to identify the determinants of profitability of Islamic banks operating in Malaysia and examine the effect of the global financial crisis on the profitability of these banks. Panel data estimation is employed with unbalanced data on seventeen Islamic banks, using quarterly data for the period of 2007 to 2010. The random effect model was specifically used to achieve the study objectives. The empirical results indicate that overhead expenses ratio, loans ratio, deposits ratio, technical efficiency and bank size have a positive significant effect in determining banks’ profitability. Meanwhile, the inflation rate has a negative significant effect in determining banks’ profitability. The findings of study indicate that capital and reserves, liquidity ratio, banks’ age, gross domestic product growth rate, Gross domestic product per capita and concentration ratio are not able to explain the variability of profitability of Islamic banks. The study also reveals that the profitability of Islamic banks is negatively affected by the global financial crisis. Keywords: Islamic Banks, Bank profitability, Malaysia, global financial crisis, panel data 

ABSTRACT

This paper aims to identify the determinants of efficiency of Islamic banks operating in Malaysia. Panel

regression analysis is employed with unbalanced data on seventeen Islamic banks, using quarterly data for the

period of 2007 to 2010. In addition to that, this study uses the Data Envelopment Analysis (DEA) approach to

estimate the technical efficiency as the dependent variable. Also, Tobit multiple regression which allows limited

dependent variables is used to analyze the factors that influence banks’ efficiency. The empirical results indicate

that bank specifics and financial structure determinants are able to explain a significant part of efficiency of

Islamic banks in Malaysia. The study reveals that domestic and foreign Islamic banks have different efficiency.

The efficiency of Islamic banks is not affected by the global financial crisis.

This study aimed to identify the impact of domestic investment as a determinant of growth in the Libyan economy during the period (1962-2008). Cobb-Douglas Function was used to analyze the relationship between real per-capita GDP and its most important determinants as described in Cobb-Douglas function. Properties of time series of the model variables have been analyzed by using several tests for determining the integration level of each time series separately. By using Johansen approach, the results showed the significance of the impact of investment on per-capita GDP, the results of tests revealed equilibrium relationship between per-capita GDP and its determinants in the

long and short-run. The study concluded that the elasticity of per-capita GDP to changes in domestic

investment is greater than the elasticity of labour force which appeared inelastic in the short and long-term.