Efficiency evaluation of commercial banks in Pakistan: A slacks-based measure Super-SBM approach with bad output (Non-performing loans)

Abstract

According to recent figures from the State Bank of Pakistan (SBP), since 2006, commercial banks’ non-performing loans (NPLs) have significantly risen. To this end, the primary objective of this research is to explore the impact of NPLs on the operational efficiency of commercial banks in Pakistan. NPLs were incorporated as bad output in the efficiency estimation of 24 CBs for the period 2006–2017. This study employs the data envelopment analysis (DEA) Super-SBM with the undesirable output for the efficiency evaluation of CBs. To test the robustness of our results, we used two different input-output bundles (model A and model B). The findings show a significant difference exists between the results estimated with and without undesirable output. Furthermore, the results of super-efficiency estimation rank the most efficient CB for the study period and distinguish it from other efficient DMUs. Models A and B show that foreign banks are always more efficient than domestic banks, while private CBs have higher efficiency scores than public CBs in domestic banking. In addition, the big five CBs show mixed findings, as in model A, they were more efficient than other domestic CBs, while in model B were less efficient. In the second stage of the empirical study, we use the system GMM to examine the impact of NPLs, bank size, and net interest margin on CBs efficiency. We discovered that NPLs have a negative and significant effect on banking efficiency, whereas bank size and net interest margin positively affect the efficiency of commercial banks in Pakistan.

Government innovation subsidy, executives’ academic capital and innovation quality: Evidence from pharmaceutical companies in China

“…By granting innovation subsidy to firms, the government not only supplements the capital of the firms and decreases the risk associated with their R&D ( Chang and Shih, 2004 ), but also distributes social resources to the enterprises and encourages them to engage in innovative activities ( Zhao et al, 2022 ). Government innovation subsidy can increase the quality of firms’ innovation on two levels: by reducing the strain on their R&D budgets ( Matallah, 2022 ) and by encouraging their R&D innovation ( Fernández Sastre and Montalvo Quizhpi, 2019 ; Shah et al, 2022a ).…”

A New Resource Allocation Multiple Criteria Decision-Making Method in a Two-Stage Inverse Data Envelopment Analysis Framework for the Sustainable Development of Chinese Commercial Banks

“…Deposits (z 1 ) is selected as the intermediate element, and it is both the input of Stage 1 and the output of Stage 2, which is the most important intermediate variable within the bank [37,38]. Interest income (y 1 ) and non-interest income (y 2 ) are selected as desirable outputs, which represent the returns of commercial banks [1], while non-performing loan balance (b 1 ) is selected as undesirable outputs, which is the key indicator to reflect the risks of commercial banks [25][26][27]. Specifically, x 1 , x 2 , and x 3 are inputs in Stage 1 of the commercial bank to produce z 1 , and then z 1 is regarded as the inputs in Stage 2 of the commercial bank to produce y 1 , y 2 , and b 1 .…”

“…Wang et al (2014) claimed that the Chinese commercial banking system has a two-stage internal structure [21]; Azad et al (2021) [22], Tan et al (2021) [23], and Yang et al (2023) [24] all emphasized that it is necessary to consider the internal system structure of banks when evaluating their efficiency; otherwise, the accuracy of commercial bank efficiency evaluation would be affected. Safiullah and Shamsuddin (2022) [25], Shah et al (2022) [26], and Wanke et al (2023) [27] all claimed that nonperforming loans should be considered undesirable outputs in the efficiency evaluation of commercial banking because they represent the risks of commercial banking and hinder its sustainable development. Therefore, considering the internal structure and undesirable outputs are of great significance in the resource allocation of commercial banks based on efficiency evaluation, but they are often overlooked in existing research.…”

Contribución de las inversiones en recursos humanos según el tipo de eficiencia técnica de la banca múltiple peruana

“…Actualmente se dispone de diferentes investigaciones relacionadas con el análisis de eficiencia en instituciones financieras, las cuales aplicaron la herramienta DEA para evaluar esta industria en distintos países o regiones durante periodos de tiempo concretos. Así, se han llevado a cabo investigaciones en Brasil (Comelli et al, 2017), Canadá (Ghahraman & Prior, 2016), Bangladesh (Uddin et al, 2022), Pakistán (Shah et al, 2022), China (Ji et al, 2023), Indonesia (Sari et al, 2022), países del BRICS (Jreisat et al, 2022), Líbano (Naimy & Chukry, 2016) y República Checa (Havranek et al, 2016), entre otros. En el Perú, el tema de la eficiencia de la banca ha sido poco explorado.…”