Abstract
•Compares Islamic to conventional bank efficiency performance in the GCC region.•Uses bootstrapped truncated regressions with two-stage DEA and single stage SFA.•Islamic banks more cost efficient in 2008/09 but lower profit efficiency 2011/12.•Islamic bank management should monitor economic conditions closely.•Domestic banks were more cost efficient than foreign banks in the GCC region.
The efficiency of Islamic and conventional banks in the GCC region is investigated using DEA and SFA before, during and after the global financial crisis (GFC). Results suggest that during the GFC, Islamic banks were more cost efficient in comparison to conventional banks. In addition, Islamic banks closed the inherent gap in terms of profit efficiency to an insignificant level compared to the period prior to the GFC and through the period under investigation. Conversely, during the period subsequent to the GFC, Islamic banks suffered more than conventional banks in terms of profit efficiency and lost their cost efficiency superiority.