Assessing Canadian Schedule I banks using DEA window analysis and the Malmquist Index

Abstract

In today's economy and society, performance analyses in the financial service industry attract more and more attention. The 7 largest Canadian Schedule I banks operate very large nationwide branch networks in all markets. They are not only essential for the security and strength of the Canadian financial system, but also make significant contributions to the economy across the country. They continue to pursue all the opportunities available to enhance their productivity and competitiveness. This paper examines the performance of 7 largest Canadian Schedule I banks using Data Envelopment Analysis (DEA) window analysis and the Malmquist Productivity Index. The DEA window analysis is applied to obtain the efficiency scores for the involved banks in the period of 1998-2007. Based on the efficiency scores the Malmquist Productivity Index was used to calculate the productivity changes. The results were further investigated and compared with economy development in Canada within the studied period. A good agreement between the model result and real economic situation was observed.