Performance evaluation of banks using balanced scorecard

Abstract

The performance evaluation of banks has important results for creditors, investors and stakeholders since it determines banks’ capabilities to compete in the sector and has critical importance for the development of the sector. The aim of this study is to propose a fuzzy multi-criteria decision model to evaluate the performance of Iranian banks. The three largest commercial banks of the Iranian banking sector are examined and the performance of each is evaluated. Drawing on the four perspectives of a balanced scorecard (BSC), this research first summarised the evaluation indices synthesised from the literature relating to banking performance. Then, to screen these indices, 22 indices were selected for banking performance evaluation. Furthermore, the relative weights of the chosen evaluation indices were calculated by fuzzy analytic hierarchy process (FAHP). As to the prioritisation of BSC’s aspects, results indicated that the financial aspect or criterion stands atop the priority list followed by the criteria of customers, learning and growth, and the internal process of the organisation respectively.