Journal of Management Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Operational-Profitability-Quality Performance of Dubai’s Banks


Affiliations
1 College of Business Administration University of Dubai, Dubai, United Arab Emirates
     

   Subscribe/Renew Journal


A parallel data envelopment analysis model of operational-profitability and operational-quality indicators was applied to the banking sector in Dubai. Information was gathered about the 18 main banks which clustered into Islamic and commercial banks. Data were obtained from two sources; for the operationalprofitability segment, data were obtained from the formal financial statements of banks in Dubai, and the data for the operational-quality segment were collected randomly from 450 customers by using a well-prepared SERVQUAL questionnaire. The technical efficiencies for both models were computed; and comparisons were made between the Islamic and the commercial banks within both models. The findings are that there are no statistical differences between the Islamic and the commercial banks in the operational-profitability model. However, the Islamic banks dominate the commercial banks in the operational-quality model. Based on an in-depth analysis, the operational-quality in Islamic banks depends on the assurance, responsiveness, and reliability factors.

Keywords

Efficiency, Financial and Non-financial Indicators, SERVQUAL, Islamic and Commercial Banks
User
Notifications

  • Ahmad, N. H. bt., Noor, M. A. N. M. and Sufian, F. (2010), The Efficiency of Islamic Banks: Empirical Evidence from the Asian Countries’ Islamic Banking Sectors, J. International Business and Entrepreneurship Development, 5(2): 154–166.

  • Al-Tamimi, H., Lafi, A. and Md Hamid Uddin (2009), Bank Image in the UAE: Comparing Islamic and Conventional Banks, Journal of Financial Services Marketing, 14(3): 232–244.

  • Akroush, M. and Khatib, F. (2009), The Impact of Service Quality Dimensions on Performance: An Empirical Investigation of Jordan’s Commercial Banks, Journal of Accounting, Business and Management, 16(1): 22–44.

  • Badreldin, A. M. (2009), Measuring the Performance of Islamic Banks by Adapting Conventional Ratios, German University in Cairo Working Paper No. 16. Available on http://ssrn.com/abstract=1492192

  • Banker, R. D., Charnes, A. and Cooper, W. W. (1984), Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis, Management Science, 30(9): 1078–1092.

  • Berger, A. N. and Humphrey, D. B. (1997), Efficiency of Financial Institutions: International Survey and Directions for Future Research, The Wharton Financial Institutions Center WP 97-05.

  • Casu, B. and Molyneux, P. (2003), A Comparative Study of Efficiency in European Banking, Applied Economics, 35(17): 1865–1876.

  • Charnes, A., Cooper, W. W. and Rhodes, E. (1978), Measuring the Efficiency of Decision Making Units, European Journal of Operational Research, 2(4): 429–444.

  • Chunhachinda, P. and Li, L. (2010), Efficiency of Thailand Commercial Banks: Pre vs Post-1997 Financial Crisis, Review of Pacific Basin Financial Markets and Policies, 13(3): 417–447.

  • Collier, H. W. and McGowan, C. B. (2010), Evaluating the Impact of a Rapidly Changing Economic Environment on Bank Financial Performance Using the DuPont System of Financial Analysis, Asia Pacific Journal of Finance and Banking Research, 4(4): 25–35.

  • Cooper, W., Seiford, L. and Tone, K. (2000), Data Envelopment Analysis: A Comprehensive Text with Models, Applications, References and DEA-Solver Software, Kluwer Academic Publishers.

  • Debasish, S. S. (2006), Efficiency Performance in Indian Banking: Use of Data Envelopment Analysis, Global Business Review, 7(2): 325-333.

  • Eken, M. and Kale, S. (2011), Measuring Bank Branch Performance Using Data Envelopment Analysis (DEA): The Case of Turkish Bank Branches, African Journal of Business Management, 5(3): 889–901.

  • European Central Bank ( 2010), Beyond Roe – How to Measure Bank Performance. Available on http://www.ecb.eu/pub/pdf/other/beyondroehowtomeasurebankperformance201009en.pd

  • Farrell, J. M. (1957), The Measurement of Productive Efficiency, Journal of the Royal Statistical Society, 120: 253–281.

  • Fethi, M. D. and Pasiouras, F. (2009), Assessing Bank Efficiency and Performance with Operational Research and Artificial Intelligence Techniques: A survey, University of Bath WP 2009-02.

  • Hassan, M. K. (2005), The Cost, Profit and X-Efficiency of Islamic Banks, paper presented at the 12th ERF Annual Conference, December 19-21, Egypt.

  • Hays, F. H., De Lurgio, S. A. and Gilbert, A. H. (2009), Efficiency Ratios and Community Bank Performance, Journal of Finance and Accountancy, 1: 1–15.

  • Heffernan, S. and Fu, M. (2008), The Determinants of Bank Performance in China, EMG Working Paper Series.

  • Isik, I. and Hassan, M. (2002), Technical, Scale and Allocative Efficiencies of Turkish Banking Industry, Journal of Banking and Finance, 26: 719–766.

  • Jabnoun, N. and Khalifa, A. (2005), A Customized Measure of Service Quality in the UAE, Managing Service Quality, 15(4): 374–388.

  • Li, Y. (2005), DEA efficiency measurement with undesirable outputs: An application to Taiwan’s commercial banks. International Journal Services Technology and Management, 6(6), 504–515.

  • Manandhar, R. and Tang, C. S. (2002), The Evaluation of Bank Branch Performance Using Data Envelopment Analysis, The Journal of High Technology Management Research, 13(1): 1–18.

  • Parasuraman, A., Zeithaml, V. A. and Berry, L. L. (1988), SERVQUAL: A Multi-item Scale or Measuring Customer Perceptions of Service Quality, Journal of Retailing, 64(1): 12–40.

  • Kalhoefer, C. and Salem, R. (2008), Profitability Analysis in the Egyptian Banking Sector, German University in Cairo, Faculty of Management Technology Working Paper No. 7. Available on http://mgt.guc.edu.eg/wpapers/007kalhoefer_salem2008.pdf

  • Sinkey, F. (2002), Commercial Bank Financial Management, Prentice-Hall, Englewood Cliffs, NJ.

  • Seiford, L. M. and Zhu, J. (1999), Profitability and Marketability of the Top 55 US Commercial Banks, Management Science, 45(9): 1270–1288.

  • Soterious, A. and Zenios, S. (1997), Efficiency, Profitability and Quality in the Provision of Banking Services, working paper, Department of Public and Business Administration, University of Cyprus, Nicosia, CYPRUS.

  • Spathis, C., Doumpos, M. and Zopounidis, C. (2002), Detecting Falsified Financial Statements: A Comparative Study Using Multicriteria Analysis and Multivariate Statistical Techniques, Eur. Account. Rev., 11(3): 509–535.

  • Stiroh, K. J. and Rumble, A. (2006), The Dark Side of Diversification: The Case of US Financial Holding Companies, Journal of Banking and Finance, 30(8): 2131–2161.

  • Sturm, J. E. and Williams, B. (2004), Foreign Bank Entry, Deregulation and Bank Efficiency: Lessons from the Australian Experience, Journal of Banking and Finance, 28(7): 1775–99.

  • Sufian, F. and Noor, M. A. (2009), The Determinants of Islamic Banks’ Efficiency Changes Empirical Evidence from the MENA and Asian Banking Sectors, International Journal of Islamic and Middle Eastern Finance and Management, 2(2): 120–138.

  • Sufian, F. (2009), Determinants of Bank Efficiency During Unstable Macroeconomic Environment: Empirical Evidence from Malaysia, Research in International Business and Finance, 23: 54–77.

  • Tsai, Hui-Yin, Cheng-Ru, Wu and Ya-Mei, Wang (2011), Operating Strategies of Banks in China: Analysis of Operational and Profitability Efficiency, African Journal of Business Management, 5(4): 1136–1145.

  • Zervopoulos, P. and Palaskas, T. (2011), Applying Quality-driven, Efficiency-adjusted DEA (QE-DEA) in the Pursuit of Highefficiency–High-quality Service Units: An Input-oriented Approach, IMA J Management Math, 22(4): 401–417.


Abstract Views: 567

PDF Views: 1




  • Operational-Profitability-Quality Performance of Dubai’s Banks

Abstract Views: 567  |  PDF Views: 1

Authors

Attiea Marie
College of Business Administration University of Dubai, Dubai, United Arab Emirates
Amjad Al-Nasser
College of Business Administration University of Dubai, Dubai, United Arab Emirates
Mohamed Ibrahim
College of Business Administration University of Dubai, Dubai, United Arab Emirates

Abstract


A parallel data envelopment analysis model of operational-profitability and operational-quality indicators was applied to the banking sector in Dubai. Information was gathered about the 18 main banks which clustered into Islamic and commercial banks. Data were obtained from two sources; for the operationalprofitability segment, data were obtained from the formal financial statements of banks in Dubai, and the data for the operational-quality segment were collected randomly from 450 customers by using a well-prepared SERVQUAL questionnaire. The technical efficiencies for both models were computed; and comparisons were made between the Islamic and the commercial banks within both models. The findings are that there are no statistical differences between the Islamic and the commercial banks in the operational-profitability model. However, the Islamic banks dominate the commercial banks in the operational-quality model. Based on an in-depth analysis, the operational-quality in Islamic banks depends on the assurance, responsiveness, and reliability factors.

Keywords


Efficiency, Financial and Non-financial Indicators, SERVQUAL, Islamic and Commercial Banks

References