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Efficiency in Banking Industry A Case Study of Measuring Efficiency in Banking System in Isfahan Province
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Khaled Amir Yousefi *   , Bahar Hafezi |
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Abstract: (17628 Views) |
| According to economic theories, the firms' growth and development would result from higher output using a fixed amount of input, or fixed output resulting from lower levels of inputs which are examples of efficiencies and productivities. This paper, after a brief review of the basics of theoretical foundations of measuring efficiency and defining and analyzing the efficiency based on the microeconomic concept of production, attempts at measuring efficiency in the banking industry.
The scope of this paper consists of the followings: two approaches to production and intermediaries in the definition of banking efficiency, three different levels of decision–making regarding the assumptions used in measuring the efficiency, the mathematical form of the four linear programming models specified for measuring the efficiency of the state-owned banking system in Isfahan province using cross section data of 1382, the identification of the efficient and non-efficient banks, remedies to improve the input and output, and finally suggestions for improving the levels of efficiencies in the banking industry.
The results show that in the year 1382, four banks, i.e., Bank Melli, Bank Maskan, Bank Refah and Bank for Export Promotion can be classified as efficient banks whereas five banks, i.e., Bank Saderat, Bank Mellat, Bank Sepah, Bank Tejarat, and Bank Keshavarzi are identified as inefficient. With the assumption of constant return to scale of 0.857 and with the assumption of variable return to scale of 0.979 and input minimization with respect to pure technical or managerial efficiencies of 0.979, and the scale efficiency of 0.867 and using the assumption of maximizing the output, the average efficiency are 0.983 and 0.865, respectively. |
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| Keywords: Efficiency, Banking, Return-to-Scale |
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Full-Text [PDF 416 kb]
(5791 Downloads)
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Type of Study: Research |
Subject:
General
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