Dr. Alaa Razia Publishes a Research Paper in the Journal of Business Research
Dr. Alaa Razia, Head of the Islamic Banking Department at An-Najah University in collaboration with researchers from the University of Santiago, and the University of the Balearic Islands in Spain, recently published a research paper on what determines efficiency in MENA banks in the Journal of Business Research.
This research paper mainly analyzed cost efficiency and its determinants in Middle Eastern and Northern African (MENA) countries during the 2005–2012 period. Results have shown that cost efficiency is positively related to economic performance, but the level of concentration and market share has a negative influence on the former, thus supporting the Quiet Life Hypothesis.
It also illustrated how the researchers have found support for the competition-inefficiency hypothesis, which may be explained by lower loyalty between customers and banks. At the individual level, size shows the importance of economies of scale and the level of capital also produces a positive effect. The effects on market structure are more important in the crisis period than before it. Turning to country-level variables, inflation and GDP are positively related to total cost function. Therefore, banking policies should promote profitability, capitalization and growth while at the same time controlling excessive concentration and competition.
