Technical efficiency analysis of banks in major oil exporting Middle East countries

Ibrahim Onour and Abdelgadir Abdalla

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates efficiency performance of thirty six banks operating in Gulf Cooperation Council (GCC) countries during the period 2006-2008 . Our results indicate in general GCC banks showed considerable pure technical efficiency in the past three years with the year 2007 exhibit the most efficient year, as the number of pure technical efficient banks reached 33 percent of the total banks compared to 25 percent in 2008. The fall in technical efficiency in 2008 is due to simultaneous fall in pure technical efficiency and the scale efficiency. The output loss caused by scale inefficiency (fall of scale operations below optimum level) in 2008 is estimated 16 percent compared to 5 percent in 2007. Our results also indicate scale efficiency is inversely related to banks' size implying a major source of scale inefficiency in GCC banks is due to sub-optimal size of operations. It is also indicated in the paper that scale efficiency is inversely related to risk, implying effective risk management policies may also enhance scale efficiency.

Keywords: technical efficiency; scale efficiency; DEA (search for similar items in EconPapers)
JEL-codes: C44 C61 C63 (search for similar items in EconPapers)
Date: 2011-01-25
New Economics Papers: this item is included in nep-ara, nep-eff and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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