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Document Type |
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Article In Journal |
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Document Title |
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Efficiency Effect of Off-Balance Sheet Transactions: The Case of the Commercial Banking Industry in the State of Kuwait تأثير أنشطة البنود خارج الميزانية العمومية في كفاءة البنوك التجارية الكويتية |
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Subject |
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Business Administration |
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Document Language |
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Arabic |
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Abstract |
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One of the most notable events in recent years is the ever increasing utilization of the off-balance sheet transactions (OBTs) in the commercial banking industry. The motivating factor for the increase was to boost banks’ profits. This development resulted from both Inadequate control on OBTs and the low cost of using them. Although empirical studies that investigate the relationship between the level of OBTs and banks’ efficiency are scarce, many writers and specialists in this field support the notion that the use of OBTs may have some negative impacts on banks’ capital adequacy and efficiency. Consequently, the introduction of “Basel Accord” in 1988 was induced to avoid the potential negative implications of the uncontrolled increase of the OBTs by commercial banks. Accordingly, Kuwait Central Bank initiated several instructions, directives and measurements during the mid nineties to ensure the achievements of the following objectives: improve commercial banks’ internal monitoring systems, enhance capital adequacy and to augment credit and investment regulations in the commercial banking industry. Therefore, it is quite clear that the aforementioned development necessitates empirical studies to test the viability of the adopted measurements and policies in the commercial banking industry. Thus, this empirical study is an effort to empirically test the efficiency effect of the Kuwait central bank efforts to rationalize the utilization of OBTs in the commercial banking industry in the State of Kuwait. The study utilizes the most advanced econometric models to quantitatively measure the relationship between the level of OBTs and economic efficiency. Using the concept of frontier functions efficiency difference between banks with differing degrees of OBTs are estimated. The empirical results of this study suggest that on one hand, the increase of the level of OBTs enhances technical efficiency, but, on the other hand, it reduces both allocative and scale efficiency. Consequently, the overall economic efficiency of the commercial banks in the state of Kuwait was found to be negatively correlated with the increased level of OBTs. Thus, the empirical results of this study have some implications for policy makers. It alludes to the importance of determining the appropriate level of OBTs by central banks. This shall enable commercial banks to increase technical efficiency and to avoid the negative consequences resulting from reduction of commercial banks’ overall economic efficiency. |
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ISSN |
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1319-0997 |
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Journal Name |
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Economics and Administration Journal |
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Volume |
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20 |
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Issue Number |
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1 |
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Publishing Year |
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1427 AH
2006 AD |
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Article Type |
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Article |
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Added Date |
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Sunday, October 11, 2009 |
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Researchers
| عبدالله محمد العبيدان | Abdullah M. Al-Obaidan | Researcher | | |
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