Efficiency Analysis of Mudarabah and Leasing Firms in Pakistan

Authors

  • Muhammad Jam e Kausar Ali Asghar Associate Professor, Department of Business Administration, University of South Asia, Lahore
  • Abdul Zahid Khan Assistant Professor, Faculty of Management Sciences International Islamic University Islamabad
  • Hammad Hassan Mirza Assistant Professor, Noon Business School, University of Sargodha, Sargodha, Pakistan
  • Tariq Iqbal Khan Assistant Professor, Department of Management Sciences, University of Haripur, Haripur
  • Muhammad Munir Khan

Keywords:

Efficiency, DEA, Modaraba Firms, Leasing Firms, Tobit

Abstract

How differently Sharia compliant modaraba firms are performing as compared to conventional leasing firms? While comparing modaraba firms and conventional leasing firms, in the first stage, current paper has computed Technical Efficiency (TE), Pure Technical Efficiency (PTE) and Scale Efficiency (SE) of both modaraba and leasing firms. Data Envelopment Analysis (DEA) is applied by following value added approach. Equity, liabilities, fixed assets, Operating expenses and are selected as input variables whereas, income and investments are selected as output variables. The results suggest that sharia compliant modaraba firms are competing well with the conventional leasing firms although they slightly outperformed modaraba firms. It indicates that there is no major difference between both FIs which implies that although Sharia compliant modarabas have lower resources and products to contest with conventional leasing firms but still they are competing well. In the second stage, the study also analyzes the association of firm specific factors with efficiency with the help of Tobit regression model which suggest that leverage, tangibility, operating expenses and profitability of the firm are significantly related with efficiency of both Financial Institutions.

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Published

2020-12-30