Efficiency Of Commercial Banks Research Articles

Efficiency Analysis of Five Conventional Commercial Banks in Indonesia by Examining the Principles of Sustainable Finance

This research analyzes the efficiency of conventional commercial banks in Indonesia by examining the principles of sustainable finance. This research only examines 5 banks in Indonesia during 2019-2021 due to the availability of data obtained from the sustainability report. The efficiency scores in 2019-2021 will be calculated using the DEA method with an output-oriented Bankers-Charnes-Cooper (BCC) assumption or Variable Return to Scale (VRS) assumption and an intermediation approach. Third-party funds, other operating expenses, and energy efficiency are input variables used in this research. Credit and securities are the output variables. In general, the results of this research conclude that several banks in Indonesia have a DEA efficiency score equal to 1 or have worked efficiently and the bank that always works efficiently during 2019-2021 is BCA. The practical implications to improve bank efficiency for banks that are not yet efficient are to maximize the distribution of funds through credit and securities, then these banks also need to take advantage of technological advances.

Profitability, problems and prospects of Indian commercial banks: A comparative assessment

This piece of study is conducted to assess profitability, efficiency, problems and future prospects of Indian scheduled commercial banks. Nature of this study is descriptive and exploratory, and fully based on secondary data. Concerned data have been collected from data release of Reserve Bank of India (2021), statistical table relating to banks in India. Besides, various ratios have been taken into consideration in order to draw conclusions such as operating expenses, operating profit, Return on Assets and Return of Equity. A significant difference was assessed amongst three groups of banks in terms of profitability and efficiency. The foreign banks emerged as most efficient and profitable banks followed by private sector and public sector banks. Moreover, as far as problems are concerned, raising NPAs, increasing competition, new innovations and high transaction cost were major cause of concern, on the other hand banking deregulation and recent consolidation by government of India, and vibrant Indian economy can turn out to be game changer for public sector banks.

Performance of commercial banks in India: a non-parametric Malmquist index-based DEA approach

The present study evaluates productivity and efficiency of Indian commercial banks in terms of TFP growth, technological change and technical efficiency performances. Efficiency have been computed using data envelopment analysis-based Malmquist productivity index for the balanced panel data set of 70 commercial banks operating in India from 2005-2017. The analysis has been carried out in two stages, all banks as a single group and three bank categories individually. The results of all banks analysis revealed that, 44% banks have recorded positive change in TFPG and category wise analysis revealed that, technological change is found to be the primary reason for positive change in TFPG of 68% private banks. Also, 15% public sector banks and 32% foreign banks recorded positive TFPG. The study concludes that there is enough scope for improvement in the performance of Indian public sector banks in comparison of its counterparts in terms of productivity and efficiency.

Comprehensive assessment of the efficiency of commercial banks

Comprehensive assessment of the efficiency of commercial banks

How efficient are banks in Croatia?

Purpose: This paper measures the relative efficiency of commercial banks in the Republic of Croatia in a period of eleven years (2009-2019) by using the leading non-parametric Data Envelopment Analysis (DEA) methodology. Methodology: In the selection of variables (inputs and outputs) and the DEA model, we have followed Banker et al. (2010). Results: Based on the results obtained, we have found that the average efficiency of the Croatian banking sector in the observed period is 92%. The highest (96%) and the lowest (90%) mean efficiency score were achieved in 2009 and in 2017, respectively. In addition, we have analyzed several banks that show significant changes in the efficiency scores, and provided targets for improvement of their efficiency. Conclusion: Croatia is a developing country characterized by a bank-based financial system and this study shows that its banking system is highly efficient, but certain relatively inefficient banks should improve their efficiency. Therefore, our findings provide valuable information for regulators, policymakers and bank management in order to take proper actions to maintain the stability of the key players in the financial system in Croatia.

Information Technology Role on Private Commercial Banks Efficiency with Cost and Profit DEA Technology

<p align="justify">IT plays a pivotal role to improve the competitiveness of the bank by providing its existing customers with satisfactory services, while at the same time bringing about a significant reduction in cost. This study measures the effect of IT factors on cost and profit efficiency of Private Commercial Banks (PCBs) in Bangladesh employing cost and profit Data Envelopment Analysis (DEA) and Ordinary Least Square (OLS) method. The average cost efficiency (41.4%) was recorded higher than the average profit efficiency (18.8%) for PCBs. Prime bank was the most cost and profit efficient among PCBs. The Credit card transaction (0.000006) and Credit card expenses (0.0002) were observed positively significant for cost efficiency of PCBs and the IT personnel expenses (0.0015) and Credit card transaction (0.00008) were positively significant for profit efficiency of PCBs. IT factors were found more significant for PCBs in profit efficiency. The results attained from this study could aid government, managers and depositors to remove the hindrance of progress in Bangladesh. This type of empirical analysis could be applied in another sector of the economic market.</p>

The Impact of Financial Technology on the Operational Efficiency of Traditional Commercial Banks

This paper uses the annual report data of 16 traditional commercial banks from 2015 to 2019, uses DEA-Malmquist index method, selects fixed assets, number of employees and operating expenses as input variables, and selects net profit and deposit loan ratio as output variables to do an empirical research on the impact of financial technology on the operating efficiency of traditional commercial banks. The results show that: commercial banks generally adapt to the changes in the financial market brought by the rapid development of financial technology, and use financial technology to improve their operational efficiency; the operational efficiency of 16 commercial banks increased in last five years, but there are differences among them. Generally speaking, the performance of local banks is better than that of joint-stock banks, and the performance of joint-stock banks is better than that of state-owned commercial banks. The average operating efficiency of commercial banks in the past five years is relatively low, mainly due to the low efficiency of science and technology application and the slow efficiency of science and technology renewal. Based on the above empirical findings, this paper makes important recommendations for bank growth, policy support, and personnel training in the context of rapid financial technology development. This paper may provide some insight into China's banking industry's efficient growth.

Digitalization and Efficiency: Technology-based Service of Indonesia Sharia Commercial Banks

<p>This study aims to assess the technology-based service effectiveness on bank profitability as well as to evaluate the efficiency and stability of Islamic Commercial Banks in Indonesia. The model was analyzed by using multiple linear regressions with generalized least square estimation technique and Data Envelopment Analysis (DEA) with data are gathered from Q1 2017 to Q2 2020. The exogenous variables included were Branchless Banking (BB), Third-party Funds (DPK), and Technology Service Quality (TSQ), with banking operational income (PENDOP) as endogenous variable.<strong> </strong>The DEA method analyses the VRS and CRS scale while using output orientation. Using the inputs of DPK, operational expenses, and total funding, with the outputs of operational earnings and total assets. The main finding suggests that DPK played as a dominant variable, following by TSQ and BB on bank operational income. Moreover, the results of the DEA models showed in four quadrants in each CRS and VRS model. Respectively, 1 and 5 banks are highly efficient and stable, 5 and 2 banks have high efficiency but low stability, 4 and 2 banks have low efficiency but high stability, 4 and 5 banks have low efficiency and stability in the CRS and VRS model. <strong></strong></p>

Efficiency Analysis of Macedonian and Croatian Banking Sectors with DEA

The aim of this paper is to measure the relative efficiency of commercial banks in two developing countries, the Republic of North Macedonia and the Republic of Croatia under the operating (incomebased) approach by using the leading non-parametric methodology data envelopment analysis (DEA). We follow Banker et al. (2010) in the selection of the approach, variables (two inputs: interest expense and other operating expense, and two outputs: interest revenue and other operating revenue) and the model (output-oriented BCC DEA model) as in their first stage. The observed period is five years (2015-2019) and we use a balanced panel data for both samples (total of 65 Macedonian and 100 Croatian bank-year observations). Outliers are identified and excluded by using the Banker and Gifford (1988) super-efficiency procedure, and the BCC output-oriented model is rerun for both samples (total 55 Macedonian and 95 Croatian bank-year observations). We provide relative efficiency scores for each bank in both sectors, as well as an average score for the banking sectors. In addition, we analyse few banks for both sectors that have decreased or increased the efficiency, or show variable results over time. Besides, we explain how inefficient banks can improve the efficiency in future by setting targets for improvement. Our study provides valuable information for banking management and regulatory bodies.

The influence of advertising on the efficiency of commercial banks

The influence of advertising on the efficiency of commercial banks

Cost Efficiency and Default Risk in Commercial Banks in Kenya

The purpose of this study was to evaluate effect of cost efficiency on default risk in commercial banks in Kenya. Many literature show that there have been an increased number of significant bank problems in USA, Brazil, India, Pakistan Indonesia, Ghana and even Kenya. In Kenya, the ratio of gross non-performing loans to gross loans increased from 6.8 percent in December 2015 to 9.2 percent in December 2016, subsequently increasing the default risk. The banking sector in Kenya has undergone several changes from the early 1990’s that was characterized by high level of bank failures, non-performing loans and inefficiencies to the current period that exhibits high levels of profitability, innovations like mobile and internet banking, agency banking, unsecured lending and the introduction of credit reference bureaus. The National treasury had hinted at introducing regulations to curb the high interest rate regime after commercial banks recorded huge profit margins in a high interest rate environment, even though depositors had been left dry. According to the bank supervisory report, the interest rate spread widened to 13 per cent at the end of December 2011 from 10.3 per cent by December 2010 which the CBK Governor termed as a sign of inefficiency in the banking sector. Secondary data was used in the study and descriptive survey design was applied. The target population was 42 Commercial Banks in Kenya out of which 2 were under receivership and 1 was under statutory management. Panel data for 39 commercial banks for the six years period from 2014 to 2019 were obtained from the CBK and individual bank websites. The study was guided by Agency theory, Moral hazard theory and Stakeholders theory. Descriptive statistics, correlation analysis and random and fixed effects were used for secondary data using E-views software. The findings indicated that cost efficiency highly reduces loan defaults. It was recommended that cost efficiency be improved in all commercial banks to reduce loan defaults. Keywords: Cost efficiency, Default Risk DOI: 10.7176/RJFA/12-22-06 Publication date: November 30th 2021

A Comprehensive Analysis of the Effects of Capital Regulation and Heterogeneity on Bank Efficiency

This article analyzes the impact of capital regulation on bank efficiency using panel data from 165 commercial banks in China from 2013 to 2019. The results indicate that cost efficiency changes slightly and profit efficiency fluctuates greatly. Under the pressure of capital regulation, the profit efficiency of commercial banks with sufficient capital improves, while profit efficiency of banks with insufficient capital decreases slightly, and the cost efficiency of all commercial banks increases. Based on the heterogeneity analysis of banks, it is found that the cost efficiency and profit efficiency of different types of commercial banks differ significantly in response to capital regulation.

Determinants Of Banking Efficiency For Commercial Banks In Indonesia: Two-Stage Data Envelopment Analysis

This study measured and analyzed the determinants of banking efficiency for commercial banks in Indonesia using the Two-Stage Data Envelopment Analysis approach within 2015-2019 period. The object in this study is commercial banks which are included in the group 4 banks category consisting of 7 conventional commercial banks. The first stage measured level of bank efficiency by Data Envelopment Analysis (DEA). BNI in 2015 and BCA during the period 2015 to 2019 shows inefficient on managing the resources. The second stage is analyzed the factors that have an influence in achieving the level of bank efficiency using the Tobit model which shows that Operational Cost and Operational Revenue (BOPO), Return on Equity (ROE), Return on Assets (ROA), and Non Performing Loans (NPL) have a significant effect on bank efficiency. Meanwhile, the Capital Adequacy Ratio (CAR) and the Loan to Deposit Ratio (LDR) have no significant impact on bank efficiency.

Analysis of Chinese Commercial Banks’ Risk Management Efficiency Based on the PCA-DEA Approach

As a special type of enterprises with high risks, Chinese commercial banks’ risk management plays an important role in banks’ business process. Measuring and improving the risk management efficiency of the Chinese commercial banking system has recently attracted increasing interest. Previous studies analyze the business performance of commercial banks from the perspective of the overall management level of banks, and few articles focus on the risk management ability of banks. This paper evaluates the technical efficiencies of Chinese commercial banks’ risk management by the DEA-BCC model with window analysis to come up with some recommendations for policy makers. The technical efficiency is then decomposed into pure technology efficiency and scale efficiency. According to the banking risk supervision indicators released by the China Banking Regulatory Commission, we choose the indicators of 26 commercial banks’ risk management during the period of 2011 to 2019. Principal component analysis (PCA) is applied to delete redundant input indicators. The paper gives a dynamic evaluation of technology efficiency, pure technology efficiency, and scale efficiency. The main empirical results are as follows: (1) the technical efficiency of Chinese commercial banks’ risk management is low, and the differences among three different types of banks are large. (2) The pure technology inefficiency of Chinese commercial banks’ risk management has become a key factor restricting the improvement of the risk management of the Chinese banking industry. (3) The Chinese commercial banks’ risk management faces a serious problem which is economies of scale. (4) The technical efficiencies of Chinese commercial banks’ risk management fluctuate greatly, and management capabilities need to be enhanced urgently.

The impact of market share on efficiency of commercial banks: Resampling slacks‐based measure data envelopment analyses model

This study applies resampling data envelopment analyses (DEA) and includes two estimation models: Triangular and Past–Present Models, to explore the operating efficiency of 37 commercial banks in Taiwan from 2014 to 2016. The empirical results are as follows: 1. No matter which models were used, the most inefficient banks from 2014 to 2016 were Bank of PANHSIN. 2. Resample model can more accurately estimate the relative efficiency of the banks than the slacks‐based measure (SBM) model. 3. Based on the Resample model, the empirical results of the SBM model show that the overestimation of the efficiency ranking is more serious.

Performance Evaluation of Chinese Commercial Banks Based on the Malmquist Index

Commercial banks have the function of promoting the raising and rational distribution of funds in economic construction in China. Commercial banks are also important in promoting the smooth development of socialist economic activities and the development of national economy and other socialist productive economic activities. At present, one of the biggest difficulties faced by China's commercial banks is the improvement of their efficiency and competitiveness in the face of continuous development and change. This paper establishes the efficiency evaluation model of commercial banks using the DEA-based Malmquist index; it also uses a data envelopment analysis (DEA) to analyze the financial data of nine listed banks in China from 2011 to 2020, studies the efficiency of commercial banks in China, and finds the efficiency differences. Based on empirical research, this paper puts forward corresponding suggestions. The research shows that the key to dealing with this situation depends on the banks’ effective utilization of scientific and technological innovation and technological progress. In order to achieve the goal of innovative and sustainable development of commercial banks, it is necessary to integrate the continuous developments of science and technology with finance.

THE COST EFFICIENCY OF CAMBODIAN COMMERCIAL BANKS: A STOCHASTIC FRONTIER ANALYSIS

The Cambodian banking sector has rapidly expanded in recent decades, although there are concerns about the performance of Cambodian banks and the country’s banking sector. A paucity of empirical evidence to clarify the real issues in the banking sector also makes it difficult to formulate effective policy measures to address any potential problems. This study provides empirical evidence by estimating the cost function and efficiencies of 34 commercial banks over the period from 2012 to 2015. We find that the average cost efficiency scores range from 0.60 when measuring bank outputs as loan and deposit amounts, and 0.77 when measuring bank outputs as interest and non-interest income, suggesting that if they are operated more efficiently, they could cut costs by 40% in fund mobilization and 23% in profit making while keeping the same output level. We also find that the Cambodian banks have experienced an improvement in efficiency scores over the period for both aspects of banking activities. Furthermore, we find that expanding a branch network into rural areas is inefficient for bank management, and holding excessive liquidity is associated with higher efficiency, but diversification in bank business operations is negatively associated with cost efficiency of Cambodian commercial banks.

EFFICIENT COMPARISON OF THE TOP 10 LARGEST COMMERCIAL BANKS IN INDONESIA: DEA (DATA ENVELOPMENT ANALYSIS)

Banking efficiency is very important in supporting the success of macro policies specifically, maintaining the sustainability of development that affects economic growth and social welfare. This study discusses the efficiency of commercial banks for the 2015-2019 period using data from the 10 largest commercial banks in Indonesia. The methodology used is non-parametric, Data Envelopment Analysis, to analyze technical efficiency. The results showed that 7 banks had a maximum efficiency level consistently during the study period and there were still 3 banks that did not reach the maximum efficiency but during certain periods or periods. Based on the results of the DEA, inefficient banks in a certain period can achieve maximum efficiency by reducing inputs such as labor costs, net fixed assets, and the number of deposits. This might be attributed that the competition in the banking industry and because not all inputs could be controlled by management, some large banks cannot maintain their level of efficiency consistently.

Efficiency, Profitability and Stability of Nepalese Commercial Banks

Efficiency, profitability and stability become an area of emergent concern in the literature and the practice. This paper attempts to examine the efficiency, profitability and stability of the Nepalese commercial banks and shows the importance of banking activities rather than simply profit achieved. Descriptive and causal-comparative research designs are used and data are collected from the financial reports of respective banks and NRB reports during the period of 2011/12 to 2019/20 of 27 commercial banks with 243 observations. Descriptive statistics have been used to present quantitative data in a manageable form and the relationship between dependent and independent variables are examined using correlation, simple and multiple regression analysis. It is found a negative and significant relationship between bank efficiency and profitability; a positive and significant relationship between bank efficiency and stability. Perhaps, this paper may be the first attempt to examine the determinants of efficiency, profitability and stability of Nepalese commercial banks. It is expected this study will bring new insight into the banking field and would provide a framework and guidelines for future study in Nepalese financial sectors.

Analysis Efficiency of Sharia Commercial Banks in Indonesia

Indonesia has the potential to become a leader in the development of the Islamic financial market in the world with majority population is Muslim. The Corona Virus Disease 2019 (Covid-19) pandemic has caused decrease in economic growth. However, the distribution of financing by Islamic banks in 2020 increased. With the current progress of the Islamic banking institution in Indonesia, it is necessary to estimation the efficiency level of Islamic banks and the impact of technology on the efficiency of Islamic banks. This research will analyze the efficiency from sharia commercial bank and the effect of internal factors and technology on efficiency. This research will used annual data from sharia commercial bank in 2014 to 2020. To analyze of efficiency will be used Data Envelopment Analysis (DEA) method and used Tobit method to analyze the effect of internal factors and technology on efficiency. In general, the efficiency of sharia commercial bank in Indonesia has a fluctuative tren in 2014-2020. The estimation results of tobit method is return on assets (ROA) has significantly contributing positive effects to efficiency. Meanwhile, technology has significantly contributing negative effect to efficiency.