Bank performance measurement in a developing economy: an application of data envelopment analysis

Ayadi, O. Felix; Adebayo, Arinola O.; Omolehinwa, Eddy

doi:10.1108/03074359810765589

Cited by 31 publications

(6 citation statements)

References 11 publications

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“…The simple case when evaluating the bank's efficiency by DEA is the use of conventional DEA alone in the analysis (e.g. Al-Faraj et al, 1993;Ayadi, 1998;Oral et al, 1992;Parkan, 1987;Vassiloglou and Giokas, 1990;Sherman and Ladino, 1995;Yue, 1992). The main aim of the early studies has been the use of the DEA technique to show its advantages by applying it in various areas.…”

Section: Literature Reviewmentioning

confidence: 99%

Efficiency and its determinants in the Algerian banks: network data envelopment analysis and partial least squares regression

Achi

2021

IJPPM

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PurposeThe purpose of this paper is to evaluate the efficiency of Algerian banks and examine the effects of explanatory factors on their performance.Design/methodology/approachIn this paper, a methodology of two-stage network data envelopment analysis (DEA) is used to explore the efficiency of a sample of 13 Algerian banks during the 2013–2017 period. In the first stage, the network DEA is used to assess the overall and stages efficiencies. In the second stage, the partial least squares (PLS) regression is conducted to determine the potential effects of explanatory factors on stages efficiency.FindingsThe main empirical results indicate that Algerian banks need an efficiency improvement in both stages. The overall efficiency of the Algerian banking system improves over the study period. The deposit producing efficiency is positively affected by bank size and bank age. The revenue earning efficiency is negatively associated with bank size and bank age. The domestic banks are more efficient than foreign banks in the deposit producing stage and the foreign banks are more efficient than domestic banks in the revenue earning stage.Practical implicationsThe results might be used as guidelines for both managers and policymakers in order to improve banks and banking system performance.Originality/valueTo the best of our knowledge, this study is the first that uses the DEA in investigating the efficiency of Algerian banks by dividing the overall efficiency into deposit producing and revenue earning efficiencies. Unlike most studies that have usually used OLS regression, Tobit regression and bootstrapped truncated regression, this study is the first in the bank efficiency literature that uses PLS regression to investigate the potential effect of explanatory variables on deposit producing and revenue earning efficiencies.

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Section: Literature Reviewmentioning

confidence: 99%

Efficiency and its determinants in the Algerian banks: network data envelopment analysis and partial least squares regression

Achi

2021

IJPPM

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“…In an attempt to monitor and evaluate the performance of banks, most financial economists and analysts have been using financial ratios (Ayadi et al 1998). The most popular and commonly used ones are return on equity (ROE) and return on assets (ROA).…”

Section: Previous Researches On the Performance Evaluation Of Banksmentioning

confidence: 99%

“…Meyer, Markiewicz (1997) Have identified critical success factors of banking performance and grouped them into eight main categories: 1) profitability, 2) efficiency and productivity, 3) human resource management, 4) risk management, 5) sales effectiveness, 6) service quality, 7) capital management, and 8) competitive positioning. Ayadi et al (1998) Hays et al (2009 Five main segments of bank operation are analyzed: capital adequacy, asset quality, management quality, earnings ability and liquidity (CAMEL). Sensitivity is added and CAMEL is model introduced.…”

Section: Previous Researches On the Performance Evaluation Of Banksmentioning

confidence: 99%

“…Mathematically, as Step 1, DEA identifies an "efficient frontier" comprised of analyzing the outputs and inputs of a certain set of objects that will be evaluated and called decision making units (DMUs) (Weber 1996). According to Ayadi et al (1998), the DEA approach should be considered as a relative measure of efficiency as it identifies the 'best practice' firm in a group according to the observed outputs and inputs. Then, each firm in the group is evaluated relatively to the 'best' firm.…”

Section: Previous Researches On the Performance Evaluation Of Banksmentioning

confidence: 99%

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The Evaluation of Bank Performance Using a Multicriteria Decision Making Model: A Case Study on Lithuanian Commercial Banks

Stankevičienė

Mencaitė

2012

Technological and Economic Development of Economy

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The paper presents an attempt to adopt a muticriteria decision making approach, particularly the Analytical Hierarchy Process (AHP) model, and to evaluate the performance of banks. The model is based on a system of various qualitative and quantitative criteria and their mutual relations. A system of indicators is created and described and each indicator is assigned a different degree of significance taking into account the needs and priorities of both internal and external evaluators. Model adaptation to Lithuanian market and an empirical test enabled to compare banks between each other, reveal their ranking and identify the banks taking leading positions in the market. The conducted research has concluded that the Analytical Hierarchy Process (AHP) model is appropriate for using it in the process valuating bank performance.

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“…[42], pp. [34][35][36], water distribution services (e.g. [31], Tab.…”

Section: Introductionmentioning

confidence: 99%

Impact of an input-output specification on efficiency scores in data envelopment analysis: A banking case study

Boďa

Piklová

2021

RAIRO-Oper. Res.

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The paper stresses the importance of making an appropriate specification of inputs and outputs in technical efficiency measurement and provides empirical evidence that this initial step of an efficiency measurement project should not be underestimated. Oriented on a case study of Slovak commercial banks for the period from 2005 to 2016, the paper explores to which extent different input-output specifications affect the comparability or congruence of technical efficiency scores produced by six different data envelopment models differing in the efficiency measure and orientation. Building on the long-standing controversy in the banking literature about the most appropriate description of banking production, the paper compares technical efficiency scores for 9 input-output specifications of the intermediation approach, 9 specifications of the production-like approaches and 3 network integrated specifications. All these specifications were empirically applied earlier in the literature. The efficiency scores produced by different input-output specifications and models are confronted by six measures of association or dependence, and their levels are explained in a regression framework. The results suggest that the choice of the input-output set is a critical judgemental input to efficiency measurement since there is vast diversity in efficiency scores of input-output sets coming from different approaches but also for input-output sets associated with the same approach. In addition, intermediation input-output specifications tend to produce higher efficiency scores than production-like specifications.

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Bank performance measurement in a developing economy: an application of data envelopment analysis

Cited by 31 publications

References 11 publications

Efficiency and its determinants in the Algerian banks: network data envelopment analysis and partial least squares regression

Efficiency and its determinants in the Algerian banks: network data envelopment analysis and partial least squares regression

The Evaluation of Bank Performance Using a Multicriteria Decision Making Model: A Case Study on Lithuanian Commercial Banks

Impact of an input-output specification on efficiency scores in data envelopment analysis: A banking case study

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