Partnership financing and bank efficiency

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper aims to analyze the effect of partnership financing on bank efficiency. Partnership financing, which has similar concept with venture capital, refers to the equitable sharing of risks and profits between the client and bank. By employing output distance function on Malaysian and Indonesian Islamic bank over 1996 to 2012, we estimate bank efficiency score using Stochastic Frontier Approach and examine its determinants. Our results show that banks with partnership financing are more efficient than other banks. Banks with low capital risk coupled with large amount of partnership financing tend to be more efficient. However, when estimating the probability of crises using an early warning system, banks with high partnership financing appear to be less efficient during crises. The results suggest that the use of partnership financing improves efficiency, especially for banks with low capital risk except during crisis.

Original languageEnglish
Pages (from-to)1-13
Number of pages13
JournalPacific Basin Finance Journal
Volume46
DOIs
Publication statusPublished - 1 Dec 2017

Fingerprint

Financing
Bank efficiency
Risk capital
Output distance function
Islamic financial institutions
Early warning system
Venture capital
Profit
Stochastic frontier approach

Keywords

  • Bank efficiency
  • Financial crisis
  • Islamic banking
  • Profit-loss sharing
  • Stochastic frontier analysis

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Partnership financing and bank efficiency. / Othman, Norfaizah; Abd Majid, Mariani; Abdul Rahman, Aisyah.

In: Pacific Basin Finance Journal, Vol. 46, 01.12.2017, p. 1-13.

Research output: Contribution to journalArticle

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