Efficiency Of Bank Branches Research Articles

Bank branch efficiency under environmental change: A bootstrap DEA on monthly profit and loss accounting statements of Greek retail branches

The objective of this study is to measure efficiency change of bank branches under external environment deterioration. In particular, we utilize a bootstrap input-oriented profit DEA and investigate homogeneous and heterogeneous branches according to branch size and location to measure efficiency change by contrasting expansion, recession and capital control effects that constitute a unique phenomenon in the postwar period in the Eurozone. Our primary research explicitly focuses on the whole retail network of a Greek systemic bank based on unpublished monthly branch Profit and Loss statements and covers the period from January 2006 to July 2016. We find that early and deep recession reduces on average branch network efficiency. The imposition of capital controls (end-month June 2015) initially causes marginal effects with a subsequent efficiency improvement in the first seven months of 2016 when economic conditions are normalized. The paper documents that branch size and location matter. On the whole, we capture efficiency deterioration in the long-run contrary to recent European evidence. Apart from the efficiency measurement over time, we provide directions to bank management for performance improvement in the capital control period. More specifically, a bootstrap DEA-based Decision Tree classification exactly quantifies for the first time a potential upgrading of underperforming branches and a second-stage bootstrap DEA regression locates important efficiency drivers such as the diversification of income and the deposit- oriented activity that could improve efficiency of the total retail network.

Efficiency of bank branches: empirical evidence from a two-phase research approach

The aim of this paper is to assess the relative efficiency of the branches of Komercijalna Banka AD Skopje during a three-year period (from 2009 to 2011). The research sample consists of eight branches performing the same financial activities during the reporting period. The mathematical technique DEA window analysis was used in the first phase in order to allow monitoring of the trend of the relative efficiency of each branch under consideration. From the bank management point of view, unexpected results were obtained in this phase; to validate the results the AHP-DEA validation model was proposed and used in the second phase. The management verified the obtained results claiming they were especially valuable in the process of making justifiable decisions for the further successful performance of the bank.

Technical Efficiency and Profitability of Services in Banking: an Application of Managerial Decision-Making Matrix

The paper is a part of an on-going study of the performance assessment of Slovak bank branches. With aim to assess better the performance of the bank branches from different angles, the efficiency-profitability managerial decision-making matrices is used. The efficiency analysis adopts the SBM non-oriented model under the standpoint of production approach. Efficiency scores together with the profit indicators of each bank branch enable to gain a comprehensive picture of network performance. DEA results suggest that there is considerable space for an improvement of the bank branches efficiency. Moreover, between the efficiency and the profitability a medium correlation was found.

Assessing the comparative performance of banking branches

Purpose– The purpose of this paper is to measure the performance and relative operating efficiency of mini branches of a commercial bank for internal benchmarking.Design/methodology/approach– The authors employ data envelopment analysis (DEA) for measuring the relative efficiency of mini bank branches in a region of a state in the USA. In addition, the authors use Tobit regression analysis for finding determinants of the efficiency.Findings– The authors identified efficient and inefficient branches using pertinent variables along with potential improvements for the inefficient branches. Among the variables, the authors confirmed that number of full-time employees and service charges were statistically significant for explaining the efficiency of bank branches.Research limitations/implications– The major limitation of this study is the one time measure of efficiency using observations for a month and selected variables. To improve this study: first, the authors need to test other variables related to, but not limited to, assets, bad loans, and number of new account opened; second, it is necessary to measure the efficiency of the branches over time.Originality/value– The contributions of this study include an application of DEA for measuring and benchmarking the performance of bank branches, especially mini branches located in grocery stores and the use of internal data, which is rarely available to the public.

The Optimization of Bank Branches Efficiency by Means of Response Surface Method and Data Envelopment Analysis: A Case of Iran

In this paper the DRC model is presented for solving multi objective problem. The proposed model is a combination of data envelopment analysis, Cuckoo algorithm and the response surface method. Due to reasons like costs, time and irreversible damages, it is not possible to analyze each and every one of the proposed models in practice, so the simulation is used. Since the number of experiments for simulation process is high then the optimization has gone to practice and directs the simulation process. The response surface method is used as one of the approaches of simulation optimization. Furthermore, data envelopment analysis is used to consider several response surfaces as efficiency response surface. Then this efficiency response surface is solved by Cuckoo algorithms. The main advantage of DRC model is to make one efficiency response surface function instate of multi surface function for every output and also using the advantages of Cuckoo algorithms. In order to demonstrate the effectiveness of the proposed approach, the branches of Refah bank in Mashhad is analyzed and the results are presented.

The efficiency of bank branches

Article history: Received March 5, 2015 Received in revised format August 16 2015 Accepted September 31 2015 Available online October 9 2015 Banking industry has significant contribution in development of economies of developing countries. Most banks execute their operations through different branches. Therefore it is important to measure the relative efficiencies of these branches. Data envelopment analysis (DEA) is one of the most useful tools in measuring banks’ performance. The present paper aims to extract ranking pattern of banks based on performance evaluation using DEA analysis. In the present research, 120 bank branches of Bank Shahr in city of Tehran were selected and their efficiencies were evaluated using DEA technique. The results are discussed and compared with similar studies. Growing Science Ltd. All rights reserved. 5 © 201

The Optimization of Bank Branches Efficiency by Means of Response Surface Method and Data Envelopment Analysis: A Case of Iran

The Optimization of Bank Branches Efficiency by Means of Response Surface Method and Data Envelopment Analysis: A Case of Iran

Ranking bank branches using DEA and multivariate regression models

Service companies continually seek improved methods to measure the performance of their organisations because they are committed to improve efficiency and effectiveness in their operating units. Managers generally regard conventional methods inadequate. DEA has proven itself to be both theoretically sound framework for performance measurement and an acceptable method by those being measured. This paper assesses bank branches efficiency using DEA technique and multivariate regression techniques. Here, we proposed two multivariate regression models. In model (1), we used the exact data and in model (2), we used weighted data for fitting the regression equation. Weights were attributed to input variables based on group analytic hierarchy process. The efficiency of this approach is tested with application in bank branches. According to the results, weighted multivariate regression model has more advantages over conventional methodologies. LINGO software is used for obtaining efficiency scores in DEA.

Ranking and evaluating bank branches using fuzzy data envelopment analysis (case study: Saman bank branches)

Data Envelopment Analysis (DEA) method is used to evaluate the efficiency of the bank branches. The present paper prioritized the indicators, using fuzzy questionnaires and by gathering the managers’ ideas, in order to obtain the most important evaluating indicators. After obtaining these indicators, Data Envelopment Analysis method was used to determine the performance bound interval, regarding the fact that the data are related to a certain period of time and their nature is imprecise and fuzzy. Then, Fuzzy Theory method and Fuzzy Data Envelopment Analysis method were employed to rank the branches, and finally the results were presented.

The relative efficiency of bank branches in lending and borrowing: An application of data envelopment analysis

The relative efficiency of fifty-two branches of a small South African bank was estimated using Data Envelopment Analysis (DEA). A factor responsible for the difference in efficiency between branches might be the difference in managing the asset (loans) and the liability (deposit) side of the balance sheet. For this reason, the relative efficiency of the lending and borrowing activities was also estimated and compared to the relative efficiency of the combined (lending and borrowing) activities.In the case of the efficiency estimates for loans and deposits, the indications are that the branches were more efficient in managing the liability side (deposits) than in managing the asset side (loans). This means that purchased funds were not utilised efficiently.

Bank performance evaluation using dynamic DEA A slacks-based measure approach

Data envelopment analysis (DEA) has been applied in many studies in the banking industry but deficiency of empirical studies in Iranian banking sector that incorporate time factor into the efficiency, have still remained. Previous studies measured the efficiency of bank branches in a single period within cross-sectional data. They did not considered effect of interconnecting activities (links) between two consecutive terms. The main contribution of this paper is to evaluate the efficiency of an Iranian bank using dynamic SBM model in DEA during three consecutive terms considering net profit as a good link and loan losses as a bad link. In order to realize most important variables (inputs-outputs), relative to our case, we made a checklist and distributed them among headmen of branches and arranged an interview with the CEO of bank. Dynamic SBM efficiency is compared with its static efficiency to check the validity of described model. In addition, input-bad link excesses and output-good link shortfalls (slacks) are analyzed and further suggestions to the management are provided.

Bank branch efficiency evaluation by means of least absolute deviations and DEA

PurposeThe purpose of this paper is to assess the efficiency of individual branches of a large Greek bank through the application of both goal programming (GP) and data envelopment analysis (DEA).Design/methodology/approachThe paper employs a particular least absolute deviations (LAD) technique (i.e. a special case of GP/constrained regression) and DEA as two performance measurement methods. The performance evaluation by means of GP is assessed utilizing two alternative conceptual (parametric functional form‐loglinear) models: one focusing on transaction and one on production efficiency. The DEA assessment using the transaction efficiency model is performed under the specifications of constant or variable returns to scale.FindingsThe two methods do provide confirmation of each other's findings. The results support the main claim that there is a strong relationship between the rankings obtained by GP and DEA. Moreover, the GP results indicate that there is a relationship between bank branch transaction and production efficiency.Practical implicationsThe results may be of interest to stakeholder groups such as bank shareholders, managers, and regulatory authorities.Originality/valueThe paper is believed to be the first to examine the application of GP and DEA to measure the efficient use of resources of bank branches in Greece in terms of location (urban‐rural).

Measuring the true managerial efficiency of bank branches in Taiwan: A three-stage DEA analysis

This paper aims to explore the true managerial efficiencies of the branches of a case bank in Taiwan. With 123 branches of the case bank comprising the sample, the study finds that, after the adjustment of environmental factors and statistical noise, managerial efficiency values from a three-stage data envelopment analysis (DEA) varies significantly from the traditional DEA model. This finding suggests that environmental variables have significant effect on branch efficiency. Moreover, scale inefficiency is the major cause of operating inefficiency in the case bank, and most branches are operating at the stage of increasing return to scale. With regards the branches’ business scope, those that operate loan and wealth management services have better managerial efficiency than those that focus on wealth management only. In terms of deposit amount, branches with a higher deposit amount generate better managerial efficiency. Finally, the results for regional location show no significant effect on branches’ managerial efficiency in Taiwan.

A survey on bank branch efficiency and performance research with data envelopment analysis

The banking industry has been the object of DEA analyses by a significant number of researchers and probably is the most heavily studied of all business sectors. Various DEA models have been applied in performance assessing problems, and the banks' complex production processes have further motivated the extension and improvement of DEA techniques. This paper surveys 80 published DEA applications in 24 countries/areas that specifically focus on bank branches. Key issues related to the design of DEA models in these studies are discussed. Much advice is included on how to design future experiments and studies in this domain. A number of areas where further research could be fruitful are suggested.

Bank branch‐level DEA to assess overall efficiency

PurposeThe purpose of the research presented in this paper is to provide a new approach related to the definition of variables in disaggregating branch expenses and income for evaluating the overall technical efficiency of bank branches by means of data envelopment analysis (DEA).Design/methodology/approachBy applying an input minimization DEA model to a sample of bank branches of a large commercial bank in Greece, this study identifies pure technical and scale inefficiencies, efficiency and size relationship and returns to scale patterns. Moreover, it explores target setting strategies for inefficient branches.FindingsResults indicate that branch size has an important influence on efficiency and that superior insights can be obtained by pure technical efficiency (PTE) and scale efficiency (SE), as constituent components of global technical efficiency (TE) than the information obtained from the analysis based on selected key performance indicators (KPIs) used by the bank under study.Research limitations/implicationsA direction of future research would be to extend the analysis to incorporate environmental factors, such as branch location, local competitive environment, investment portfolio risk, among others, into the DEA assessment.Practical implicationsThe study shows that DEA which provides an overall summary measure with respect to global TE and its constituent components PTE and SE can be used to complement the in‐house performance management system of the bank under study for the evaluation of its branch network.Originality/valueFrom a policy perspective, this study highlights the use of DEA combined with statistical analysis to support the reduction of burden by means of either expense reduction or revenue enhancement.

Measuring bank branch performance using Data Envelopment Analysis (DEA): The case of Turkish bank branches

The aim of this study is to develop a performance model for measuring the relative efficiency and potential improvement capabilities of bank branches by identifying their strengths and weaknesses. Another purpose is to investigate the production and profitability aspects of branches. Under both production and profitability approaches, efficiency characteristics of branches, which are grouped according to different sizes and regions, have similar tendencies. In both analyses, it is apparent that branch size and scale efficiency are related to each other. As branch size increases scale efficiency increases too and after the most productive scale size, however, as size increases efficiency decreases. Too small and too large branches need special attention. Putting production and profit efficiency scores on two scales reveals the performing characteristics of branches. Each region needs different handling. Branches with low production-low profit efficiency should be evolved towards high production-high profit efficiency region. Key words: Data envelopment analysis, bank branch performance, efficiency, technical efficiency, pure technical efficiency, scale efficiency.

Including the customer in efficiency analysis: Evidence of a hybrid relational‐transactional approach

Purpose – The purpose of this paper is to illustrate the effect of including the customer as a resource in efficiency measurement. Variations in counting the customer illustrate the different impacts on efficiency between a transactional and a relational approach to bank branch marketing. Design/methodology/approach – The paper uses data envelopment analysis to analyse the efficiency of the branch network under consideration. This technique, while well established in the bank branch efficiency literature, is used here to gain insight into how relationship and transactional paradigms are affecting performance. Findings – Although the average profile of the efficiency scores was similar, the scores of the individual branches differed greatly depending on how customers were counted. Some branches then can be typified as relationship oriented while others as transactions oriented bearing in mind that all branches have both remits. Practical implications – Future research in efficiency measurement should include customers as a resource of the bank given the importance of them for the activity of co‐production. Careful consideration is required however of the method of accounting for these customers bearing in mind that different conceptualisations may significantly affect the efficiency score of the individual branches. Originality/value – This paper sheds light on what is happening at branch level in a large network in the UK in terms of how transactions and relationship marketing approaches are affecting efficiency scores and the objectives of the branch. It also answers a call for research into organisations that simultaneously use relationship and transactions marketing.

Two-stage evaluation of bank branch efficiency using data envelopment analysis

There are two key motivations for this paper: (1) the need to respond to the often observed rejections of efficiency studies’ results by management as they claim that a single-perspective evaluation cannot fully reflect the operating units’ multi-function nature; and (2) a detailed bank branch performance assessment that is acceptable to both line managers and senior executives is still needed. In this context, a two-stage Data Envelopment Analysis approach is developed for simultaneously benchmarking the performance of operating units along different dimensions (for line managers) and a modified Slacks-Based Measure model is applied for the first time to aggregate the obtained efficiency scores from stage one and generate a composite performance index for each unit. This approach is illustrated by using the data from a major Canadian bank with 816 branches operating across the nation. Three important branch performance dimensions are evaluated: Production, Profitability, and Intermediation. This approach improves the reality of the performance assessment method and enables branch managers to clearly identify the strengths and weaknesses in their operations. Branch scale efficiency and the impacts of geographic location and market size on branch performance are also investigated. This multi-dimensional performance evaluation approach may improve management acceptance of the practical applications of DEA in real businesses.

Including the customer in efficiency analysis

PurposeThe purpose of this paper is to illustrate the effect of including the customer as a resource in efficiency measurement. Variations in counting the customer illustrate the different impacts on efficiency between a transactional and a relational approach to bank branch marketing.Design/methodology/approachThe paper uses data envelopment analysis to analyse the efficiency of the branch network under consideration. This technique, while well established in the bank branch efficiency literature, is used here to gain insight into how relationship and transactional paradigms are affecting performance.FindingsAlthough the average profile of the efficiency scores was similar, the scores of the individual branches differed greatly depending on how customers were counted. Some branches then can be typified as relationship oriented while others as transactions oriented bearing in mind that all branches have both remits.Practical implicationsFuture research in efficiency measurement should include customers as a resource of the bank given the importance of them for the activity of co‐production. Careful consideration is required however of the method of accounting for these customers bearing in mind that different conceptualisations may significantly affect the efficiency score of the individual branches.Originality/valueThis paper sheds light on what is happening at branch level in a large network in the UK in terms of how transactions and relationship marketing approaches are affecting efficiency scores and the objectives of the branch. It also answers a call for research into organisations that simultaneously use relationship and transactions marketing.

The impact of environmental variables on efficiency evaluation: a fuzzy DEA approach

Efficiency in the service section is a significant issue in the global trade. The increase of the influence of the service industry on the economy causes more and more firms to be sensitised to service and service management. As one of the businesses, bank branches have a pioneering role in the service sector. Therefore, analysis of bank branches efficiency is important for investors, creditors, business partners and the government. But due to locating in different environments, bank branches have different performance form each other. A part of this difference is caused by non-discretionary environmental factors such as population density. These factors are not controllable by the branch manager. With respect to the importance of the problem, this research applies fuzzy logic for evaluating bank branches efficiency in order to consider the environmental variables with imprecise data.