By Athirah Safea Jamaluddin, Nor Najwa Hanani Ilyas, Syukriah Ali, Najah Mokhtar & Kartini Kasim
Abstract
The main objective of this study is to determine the factors affecting banking efficiency and to compare bank efficiency between Islamic and conventional banks in Malaysia. A total of 16 Islamic banks and 27 conventional banks in Malaysia were analysed to achieve the objectives. Ordinary Least Squares (OLS) was used to determine the factors that affect banking efficiency while Levene’s Test were applied to compare the banking efficiency between Islamic and conventional banks in Malaysia. The results reveal that five variables, which are Level of Capitalization (CPT), Credit Risk (CR), Riskiness of Bank (RB), Return on Asset (ROA) and Bank Size (BS) affect the banking efficiency of Islamic banks. However, only four variables affect the banking efficiency of conventional banks, which are Level of Capitalization (CPT), Riskiness of Bank (RB), Return on Asset (ROA) and Bank Size (BS). Overall, Levene’s Test shows that conventional banks are more efficient than Islamic Banks.
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