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Total Factor Productivity Change in the Middle East Banking:The Case of Jordanian Banks at the Turn of the Millennium

Author

Listed:
  • Ihsan Isik

    (Professor of International Banking and Finance, Rowan University, Glassboro, NJ, USA)

  • Ihsan Kulali

    (Institute of Social Sciences, Bahcesehir University, Istanbul, Turkey)

  • Busra Agcayazi-Yilmaz

    (LeBow College of Business, Drexel University, Philadelphia, PA, USA)

Abstract

This paper analyzes the total factor productivity developments in the Middle East banking, by drawing on the experience of Jordanian banks at the start of the new millennium. In order to control for the effects of different specifications of banking technology on the results, this study estimates the productivity and efficiency growth scores under two alternative approaches, production and intermediation models. On average, under the former model, we found 79% technical efficiency and 3.2% productivity growth, while under the later model we found 92% technical efficiency and 3.3% productivity growth for the sector. One implication is that the Jordanian banks can obtain considerable resource savings if they can catch up with the best practice banks. Among the organizational forms operating in this emerging market, we found that commercial banks generally outperform both investment and Islamic banks in terms of efficiency and total factor productivity growth. Key Words: Jordan, Middle East, Efficiency, Productivity, Dea

Suggested Citation

  • Ihsan Isik & Ihsan Kulali & Busra Agcayazi-Yilmaz, 2016. "Total Factor Productivity Change in the Middle East Banking:The Case of Jordanian Banks at the Turn of the Millennium," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 5(3), pages 01-29, April.
    • Handle: RePEc:rbs:ijbrss:v:5:y:2016:i:3:p:01-29
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