Does country governance and bank productivity Nexus matters?
ISSN: 1759-0833
Article publication date: 7 October 2020
Issue publication date: 13 January 2022
Abstract
Purpose
This study aims to examine the impact of country governance and other potential bank-specific characteristics and macroeconomic condition determinants on bank productivity in the period of 2006–2016.
Design/methodology/approach
The productivity level of total 167 banks selected from Malaysia, Indonesia, Brunei and Singapore are evaluated using the data envelopment analysis-based Malmquist productivity index method. A panel regression analysis framework based on ordinary least squares, a fixed effect and a random effect models then are used to identify its main determinants.
Findings
The empirical findings indicate that the total factor productivity changes of Islamic banks is higher than conventional banks. The liquidity and global financial crisis influence both banks’ productivity. Bank size, credit risk, market power, management efficiency and inflation merely influence Islamic banks’ productivity. On the country governance dimensions, voice and accountability are found to positively influence both banks’ productivity. Regulatory quality and rule of law (RL) significantly influences the conventional parts. Political stability and absence of violence, government effectiveness, RL and control of corruption negatively influence the banks’ productivity, but this influence is only significant for the Islamic banks.
Originality/value
Country governance has received surprisingly little attention in the banking industry over the past few decades. Majority of the studies that examine the effect of governance on bank performance have focused more on the micro governance dimension. Thus, to the best of the researcher’s knowledge, no study has been done to address the effect of country governance on the productivity of the Islamic and conventional banks.
Keywords
Acknowledgements
We would like to thanks the editors and the anonymous referees of the journal for constructive comments and suggestions, which have significantly helped to improve the contents of the paper. Furthermore, special thanks to: 1) Universiti Putra Malaysia Grant Putra Vot No. 9632100 sponsored by Universiti Putra Malaysia; 2) Fundamental Research Grant Scheme (FRGS) Vot No. 5524716 FRGS/1/2015/SS01/UPM/02/1 sponsored by Malaysian Ministry of Higher Education; 3) Universiti Putra Malaysia Grant IPM Vot No. 9473700 sponsored by Universiti Putra Malaysia; 4) University Grant Phase 2/2017 research code (PPP/FEM/0217/051000/10218) sponsored by Universiti Sains Islam Malaysia and 5) USIM/YTI/FEM052002/41118 sponsored by Yayasan Tun Ismail Mohamed Ali Berdaftar (YTI) Permodalan Nasional Berhad (PNB) as an organisations that funded our research and 6) Xiamen University Malaysia Research Fund Vote No. ISEM/0021 sponsored by Xiamen University Malaysia. The usual caveats apply.
Citation
Kamarudin, F., Mohamad Anwar, N.A., Md. Nassir, A., Sufian, F., Tan, K.M. and Iqbal Hussain, H. (2022), "Does country governance and bank productivity Nexus matters?", Journal of Islamic Marketing, Vol. 13 No. 2, pp. 329-380. https://doi.org/10.1108/JIMA-05-2019-0109
Publisher
:Emerald Publishing Limited
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