Efficiency of Islamic banks during subprime crisis: Evidence of GCC countries

Abstract

This paper investigates the efficiency of the Islamic bank in GCC countries around the subprime crisis of 2008. The score of efficiency is evaluated by using the Data envelopment approach (DEA). Two different approaches are evaluated; the constant return scale (CRS) and Variable return scale (VRS). Then, a regression panel analysis is employed to examine the relationship between efficiency scores derived from the DEA to a set of explanatory variables combined between macroeconomic variables and microeconomic variables. The main finding of this paper is to show that the Islamic bank remains efficient under subprime crisis. © 2013 The Clute Institute.