DETERMINANTS OF FINANCIAL EFFICIENCY IN ISLAMIC BANKS: AN INTEGRATED CONCEPTUAL FRAMEWORK
DOI:
https://doi.org/10.35631/AIJBES.829062Keywords:
Bank-Specific Determinants, Country Governance, Financial Efficiency, Islamic Banks, Integrated Conceptual FrameworkAbstract
Financial efficiency has been witnessed as a key indicator for the long-term success, sustainability, competitiveness, and resilience of Shariah banks operating in increasingly complex economic and institutional settings. Prior literature, regarding the determinants of Islamic banks’ efficiency, remains fragmented with inconsistent findings because researchers examined the bank-specific, macroeconomic, and country governance determinants in isolation. To address this gap, the present study proposes an integrated conceptual framework that explains how these three categories of determinants collectively shape the financial efficiency of Islamic banks. Employing a conceptual literature review approach, this paper critically reviews and synthesises the existing literature to investigate the interconnections among bank-specific characteristics, macroeconomic factors, and institutional governance. The proposed integrated framework positions financial efficiency as the outcome of dynamic relationships among bank-specific capabilities, macroeconomic environments, and governance quality (including Shariah governance), offering a more comprehensive explanation for efficiency variations across Islamic banking systems. This study theoretically contributes to the Islamic banking literature by consolidating fragmented evidence into a coherent conceptual framework and provides a foundation for future empirical research. This study is also practically beneficial for bank managers, regulators, and policymakers seeking to strengthen financial efficiency across diverse institutional and economic contexts of different countries and regions.
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