Evaluating the Impact of the Global Competitiveness Index and Risk on the Efficiency of Islamic Banking System Compared to Conventional Banking Using the Difference-in-Differences Estimator

Islamic banks, like conventional banks, face defined risks within the banking system, with credit risk being potentially the most significant threat to both banking systems. However, in certain instances such as the recent financial crisis, Islamic banks unlike traditional banks were not directly exposed to investment risks in financial derivatives or securities of traditional financial institutions. This factor acted as a shield against the negative impacts of the crisis. Given the growing demand for Islamic banking, the need for transparency in the laws and regulations governing these banks is increasingly important, and detailed mechanisms of their operations must be introduced. The present study aims to evaluate the impact of the Global Competitiveness Index and risk on the efficiency of the Islamic banking system compared to conventional banking. For this purpose, a Difference-in-Differences (DID) policy implementation model is applied using annual data from ۱۹۷۰ to ۲۰۲۳. The treatment group consists of countries with Islamic banking systems, which were licensed to operate Islamic banks starting in ۱۹۸۳, while the control group comprises countries with conventional banking sectors. According to the results, the difference in the policy implementation effect (_x۰۰۰۳_) for countries in both the treatment and control groups is negative and equals -۳.۴۴۷, indicating the successful impact of the Islamic banking policy in the treatment countries including Iran, Malaysia, Bangladesh, and Saudi Arabia that implemented Islamic banking systems in ۱۹۸۴, compared to the conventional banking sectors of control countries including Malaysia, Saudi Arabia, Bahrain, and Turkey. In other words, the implementation of Islamic banking policies has led to greater stability and improved efficiency in the Islamic banking industry, albeit with a relatively modest effect size. Therefore, focusing on the stability aspects of Islamic banking can play a crucial role in enhancing banking stability in countries, and increasing macroeconomic stability and resilience ultimately reduces costs and improves efficiency.

کلیدواژه ها:

Competitiveness ، Banking System Efficiency ، Islamic Banking ، Conventional Banking ، Difference-in-Differences Policy Implementation Model