Abstract
This study measures the relative efficiency of 13 commercial banks in Turkey for the year of 2011 with an integrated approach includes Analytic Hierarchy Process and Data Envelopment Analysis. It uses two inputs (personnel expenditures and number of branch) and four outputs (deposits-national currency, deposits-foreign currency and precious metal, cash loans, and non-cash loans) in terms of production approach. According to empirical result, state-owned commercial banks are efficient in both CCR (Charnes-Cooper-Rhodes) and BCC (Banker-Charnes-Cooper) model. However, foreign-owned commercial banks have the lower efficiency scores than both state-owned and private-owned commercial banks. The results also suggest that inefficient banks should especially improve their non-cash loans and should focus on their annual personnel expenditure. Moreover, more than half of the commercial banks are scale inefficiency. The results of the study may be useful for the bank managers in assessing their performance.
Highlights
Banking sector in transition and developing economies has experienced major transformations since the 1990s
Pairwise comparison matrix were constituted based on data from three experts from three commercial banks
This study measure the relative efficiency of 13 commercial banks in Turkey
Summary
Banking sector in transition and developing economies has experienced major transformations since the 1990s. Over the last few decades, the banking sectors around the world have experienced financial globalization, technological changes, and competition. Banks are faced with increasing competition and rising costs as a result of regulatory requirements, financial and technological innovation, and challenges of the recent financial crisis. Banking sector has changed with the advanced applications in computer and communications technology and introduction of new financial instruments. Such changes have significantly modified bank production. In this regard, a frequently asked question is about the effect of these changes on the efficiency of banks (Grigorian & Manole, 2002). It has become important to assess the relative role of different institutional and policy settings in explaining the difference between banks (Grigorian & Manole, 2002)
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