In contrast to the previous local studies that mostly witnessed the 1997 banking calamity, the findings in this study found that the Islamic banking operators in Malaysia achieved high efficiency in utilising the inputs and resources to generate higher profit, but are not efficient in managing costs and expenses. In addition, domestic Islamic banks and Islamic windows are generally more efficient than foreign Islamic windows. The findings from this study concluded that Islamic banking operations in Malaysia have gained improvement in both cost and profit efficiency since 2002 probably as a result of the forced merger scheme implemented by the BNM to bring about greater efficiency to domestic banking operations.
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