Comprehensive performance evaluation of banking branches: A three-stage slacks-based measure (SBM) data envelopment analysis

Abstract

The productivity of the banks in any country is a key factor in the growth and development of that country's economy. Recently, the evaluation and improvement of the productivity of the banking industry has been taken into much consideration in Iran. Data Envelopment Analysis (DEA) is a comprehensive and accepted approach for assessing the performance of banking industry. Although extensive studies have been done on banking industry using standard DEA models, they are, in fact, they ignore the internal structure of bank performance. Since the overall operational process of the banking system is made up of several partial processes, network DEA models are used to take into account all the internal components of the process and the coherence of the whole process. This is also done as the evaluation of the efficiency of partial processes helps to identify the sources of inefficiency of the overall banking system. In the present study, a network Slacks-Based Measure (SBM) DEA model is used in which the efficiency of the overall system is equal to the weighted average of the efficiency of the individual stages. The main advantage of this model is its ability to provide better efficiency criteria, calculate the weight of each stages separately, and simultaneously evaluate the mediator variables as both input and output. Finally, the comprehensive performance evaluation of banking industry is designed in three divisions, namely, production, intermediation, and social welfare approach. The model is applied to simultaneously evaluate operational efficiency, service effectiveness, and social effectiveness for 37 branches of one of the largest commercial banks in Iran.

Analysis and Evaluation of the Regional Characteristics of Carbon Emission Efficiency for China

“…Some existing scholars have researched only the inter-provincial and industrial CEE in China [29,30], and some of them used a three-stage DEA to evaluate the performance level of carbon dioxide emissions in China's inter-provincial regions. The three-stage DEA model also has its shortcomings, so some scholars combined it with the SBM model to construct a three-stage SBM-DEA model with undesired outputs, which effectively avoided the problem of input and output slack in the DEA model [31,32]. Besides, to further solve and optimize the decision unit ranking problem, some scholars have combined it with super-efficiency DEA to conduct research [33].…”

“…The evaluation results using the three-stage DEA model are quite different from the traditional DEA model. The environmental factors and random errors have a certain impact on the efficiency evaluation [30,31]. However, in the existing literature, the measurement of CEE based on the three-stage DEA model is mostly measured from a static perspective, and less consideration is given to changes in dynamic performance, which leads to certain limitations in understanding the dynamic changes in carbon emissions.…”

Bank efficiency and failure prediction: a nonparametric and dynamic model based on data envelopment analysis

“…In this way, the performance or productivity of DMUs can be evaluated through the efficiency shown by DEA models. Many studies employ DEA to analyze bank performance compared to their peers (Mahmoudabadi & Emrouznejad, 2019 ; Ouenniche & Carrales, 2018 ; Yang, 2014 ). There are also some studies combining other methods to measure banks’ efficiency, such as DEA with network analysis (Antunes et al, 2021 ; Tan et al, 2021 ), or bootstrap methods (Dia et al, 2020 ) etc.. Stochastic Frontier Analysis (SFA), as a parametric production efficiency frontier analysis tool, is also widely used to evaluate the operating efficiency of banks (Ngo & Tripe, 2017 ).…”

Overall efficiency of operational process with undesirable outputs containing both series and parallel processes: A SBM network DEA model

“…In the existing literature, many models for evaluating the efficiency of network systems have been proposed , such as independent model (Seiford and Zhu, 1999;Zhu, 2000), ratio-form system efficiency model (Kao and Hwang, 2008;Kao, 2009;Chen et al 2012;Guo et al 2020;Ma et al 2020), ratio-form process efficiency model (Cook et al 2010;Wang and Chin, (2010); Wu and Birge, (2012)), game theoretic model (Chen et al 2006;Zha and Liang, 2010;Shi et al 2020), slacks-based measure model (Tone and Tsutsui, 2009;Zha et al 2016;Zarei et al 2018;Yang et al 2021) and so on. Two or three stage Slack-Based network DEA have also been applied for evaluation of banks (Mahmoudabadi and Emrouznejad, 2019;Li et al 2018) SBM approach to evaluate the efficiencies of Chinese commercial banks. They divide the banks' operational process as two processes -productivity process and profitability process.…”