Edited by M. Kabir Hassan
Chapter 19: How efficient are the commercial, investment and Islamic bank managers in Jordan?
The purpose of this study is to analyse the X-efficiency of banking firms operating in an emerging market, by drawing particularly on the Jordanian experience. Similar to some other Arab countries in the region, Jordan has embarked on important economic and social reforms to promote efficient financial markets and institutions for a genuine and enduring economic growth. Some empirical studies have found that management quality is the predominant cause of operating inefficiency and eventual failure in financial institutions. Thus, the type of X-efficiency we consider in this study is managerial efficiency (ME), which refers to optimal utilization of productive resources by bank management. Because it relies solely on the amounts of inputs and outputs in its calculation and does not involve factor prices, which are mostly market or regulation driven, technical inefficiency is entirely under the control of bank management and thus results directly from management laxity and. Our results indicate that public and foreign ownership is negatively associated with efficiency. Managerial efficiency also declines with ownership concentration, perhaps implying that closely held and family-owned businesses are not efficient organizational structures. Internationalization of bank operations seems to benefit domestic banks in terms of operational efficiency, as banks may be able to exploit scale and scope economies with the expansion of operations to new markets. Likewise, increasing size, producing more loans as a fraction of total assets or expanding market share in the domestic market appear to be the main characteristics of more efficient firms, all of which again suggest that increasing scale of operations may be one solution to eliminate underutilization of factor inputs in the Jordanian banking.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.