Competition and banks' financial performance in dual banking: Evidence from efficiency-adjusted market power

Purpose ― This paper examines banking competition's effect on Malaysia's financial performance from 2008–2020. study investigates the relationship between banks' market competition and by examining profits risks. Further, this current whether association differs for Islamic banks. Methods The research studies Malaysia as a sample country employs data span 2008-2020. In order to address omitted variable bias, simultaneity endogeneity are avoided using two-step GMM model. Findings Our results recommend that more inspires sector invest in risky ventures offset losses revenues. Moreover, today is still based basic operations like granting loans (or financing banks), collecting deposits, managing payment systems. Implication Since our findings show negative of bank's performance, we suggest lowers greater risk. It suggested regulators policymakers develop infrastructure terms controlled encourage banks diversify their efficiently. We find no significant difference conventional banking. Originality first examine bank developed dual system efficiency-adjusted Lerner index.