Effect of Conventional and Islamic Banks in Jordan: Before and After Arab Spring

Abstract

This study utilizes Data Envelopment Analysis (DEA) to measure the efficiency of conventional and Islamic banks in Jordan at the first stage. The data covers the period from 2008 and 2019, and a total of 13 conventional and 3 Islamic banks. In the second stage, the data were then analyzed by different parametric and non-parametric tests (e.g., T-test, Mann–Whitney and Kolmogorov–Smirnov tests). The findings reveal that, overall, Islamic banks have higher level of efficiency compared to conventional banks. However, when we have taken the Arab Spring (AS), we observed that Islamic banks have better level of efficiency before AS (2008-2010) but conventional banks outperformed after the AS (2011-2019). Furthermore, we also did not find any significant differences in efficiency between young and old banks. In contrast, there were significant differences in efficiency between small and large banks and the latter outperformed the former. The findings shed light on the relative efficiency levels of these two types of banks, providing insights for policymakers, regulators, and bank management.