An Assessment Study on the Efficiency of Banks through Data Envelopment Analysis (DEA). Case Study: A Bank Based in Tehran
Authors: Mohammad ATAEI, Soamayeh NASERIAN
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Due to their specific economic conditions, banks and financial institutions in Iran are among the most important economic entities. For that reason, the Iranian economic development involves how those institutions perform their activities. In many developing societies, the capital markets such as banks play, for various reasons, the leading role in financing the medium-term and long-term economic programs. Given the importance of how banks and financial institutions function in Iran, and the current situation where the banking system is surviving the crippling sanctions, it seems crucial to take appropriate measures for evaluating the efficiency of banks. In this study, the technical efficiency was evaluated through the data envelopment analysis (DEA) at One of Bank based in Tehran. This research was conducted on the basis of two input and output factors through the DEA-Solver. The factors were as follow: A) The inputs were the number of employees per branch, the DEA method at each branch, the value of assets for each branch, and the volume of deposits; and b) The outputs were the total facilities granted and the earnings per branch. In this study, any branch scoring 100 was rated as efficient, while the branches under that score were considered inefficient. Given the limitations of other methods and data available, the DEA was employed considering the output-based BCC. The results of assessing the mean technical efficiency assuming the difference between the variable and the scale indicated that the average efficiency of the total of 97 Tehran Branches in three years was about 38% in 2010, 46% in 2011 and 36% in 2012. Furthermore, the mean value for the three years was 36.5%. The results also showed that during the period under study at the output-based mode, an average 90% of Tehran branches were inefficient in 2010. In 2011 and 2012, the figure amounted to 95%, which implies that a great percentage of banks are inefficient. The average values for the entire period was about 92.5%. The principal management in Tehran can achieve the status of full efficiency by adding 64% to outputs without increasing their inputs. In other words, the principal management in Tehran indicated 64% inefficiency of the branch network within the three years assuming the difference between the variable and the scale. According to the results, it can be argued that 7 branches (Commodity Exchange, Headquarters, Vali-e-Asr, Jannat Abad, Aghanour, Shahid Motahari and Gheitarieh) attained full efficiency over the study period, whereas the other branches failed to obtain the full efficiency.