Modeling the Impact of Geographic Environment on Bank Performance in Selected Islamic Countries

The aim of this research is to model the impact of geographic environment on banking performance in selected countries, which based on theoretical literature of the selected countries and the total efficiency factor using the methods of economy the data panel is based on and estimated. To obtain the total efficiency factor, Solow residue was used. The results of the estimated model based on panel data of 2000-2015 showed that the geographic environment has a positive effect and economic instability. Financial instability in the long run has a negative effect on total factor productivity banking system of selected countries. The results obtained in this study are consistent with empirical studies. Given the positive effect of the geographical environment on the performance of the banking system, it is recommended that investors choose, first, in each region, a bank that has the best performance compared to other banks. Secondly, prioritize your stock options when examining the products of the banks. Given the negative impact of financial instability on total factor productivity, stabilizing financial markets to improve the business environment, creating a secure environment for investment through financial intermediaries, which ultimately can lead to liquidity towards productive economic activities and preventing speculative activities and financing more efficient investment projects, it seems necessary to improve productivity.