How to Choose a Nonparametric Frontier Model? Technical Efficiency of Turkish Banks Assessing Global

Abstract

This article aims to address current gaps in the literature on banking efficiency using the data envelopment analysis (DEA) model. The study assesses the technical efficiency of the Turkish banking sector in the period spanning from 1990 to 2010 in-line with DEA model. In comparison with the DEA model, the CCR model (developed by Charnes, Cooper & Rhodes, European Journal of Operational Research, 1978, 2(6): 429–444) does not need model assumptions on input/output orientation. It also avoids the dilemma about the choice of input/output indicators. The comparison analysis of this study reveals that the CCR model yields more significant efficiency results than the BCC model (developed by Banker, Charnes & Cooper, Management Science, 1984, 30(9): 1078–1092). This study provides important contribution to the current empirical research on banking efficiency. The empirical results of the study reveal a steady increase in global efficiency of the Turkish banking sector over the past two decades. The future research could focus on the behavioural aspects of bank efficiency (e.g., managerial practices). The study also offers managerial implications.

What Drives the Liquidity of Industrial Firms?

“…However, as the managerial ownership increases, the managers become more concern about their interests at the expense of shareholders' and a higher levels of cash holdings are observed. In a different context, Bannour et al (2020) document an increase in global efficiency of the Turkish banking sector; bank borrowings are considered to be a substitute for cash holdings.…”

Determinants of Bank Effciency: Evidence from Regional Development Banks

“…The second type of input is third-party deposits, which cover current accounts, savings accounts and time deposits (Bannour et al 2918;Diallo 2018;Mokhtar et al 2008;Sakar 2006;Zenios et al 1999;Felix et al 1998;Fukuyama 1993). The final commonly used input in DEA is fixed assets, including available space (Bannour et al 2018;Diallo 208;Golany & Storbeck 1999;Sufian & Noor 2009;Zenios et al 1999;Al-Faraj et al 1993;Vassiloglou & Giokas 1990;Hassan et al 2009). The use of fixed assets as a DEA input is considered very appropriate in the context of measuring RDB efficiency, for two main reasons.…”

“…Under the DEA approach, a bank is considered efficient if it cannot improve its output or reduce its input without increasing other inputs or decreasing other outputs, and therefore efficient banks have an efficiency score of unity or 100 percent (Chen & Yeh 2000;Vincova 2005). In other words, if the DMU has an efficiency score of 1 then it is considered efficient in DEA, otherwise, it is inefficient (Bannour et al 2018;Sathye 2001).…”