• Wan Hakimah Wan Ibrahim
  • Abdul Ghafar Ismail
Keywords: Bank Regulation, Efficiency, Panel Data, DEA, Maqasid Shariah Index


We use a new dataset on Islamic bank to link the regulation and bank efficiency. Specifically, we examine how bank efficiency is influenced by: (i) bank regulation, (ii) contract enforcement, (iii) economic freedom, and (iv) shariah law parameters. Our hypothesis tries to prove that a better regulation will produce a higher level of efficiency. We will also try to prove that shariah law parameter will promote better efficiency among Islamic banks. Specifically, our results suggest that a significant relationship exists between bank efficiency and greater restrictions on Islamic banks’ activities. The results also show that regulatory quality has a positive and significant impact on bank efficiency. The negative coefficient of the economic freedom indicates that since Islamic bank have greater ability to enter into banking industry and obtain an easy license, create products and services, and close the business. All would dampen bank efficiency. Overall, our findings support the argument that regulation should be adapted to the risk and size level of the Islamic banks that are being regulated.


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How to Cite
Wan Ibrahim, W. H., & Ismail, A. (2020). DO REGULATION, MAQASID SHARIAH AND INSTITUTIONAL PARAMETER IMPROVE ISLAMIC BANK EFFICIENCY?. Journal of Islamic Monetary Economics and Finance, 6(1).