Investigating the financial efficiencies and productivities of the banking sector

Fazıl Gökgöz, Engin Yalçın and Noor Ayoob Salahaldeen

Journal of Economic Studies, 2023, vol. 51, issue 5, 1036-1057

Abstract: Purpose - The banking industry, which is one of the most significant industries when taking into account both deposit sizes and employment statistics in Turkey, is one of the country's primary economic drivers. In this regard, it is highly important to evaluate banks as it is necessary to present to what extent they use their resources efficiently. The main purpose of the study is to analyze the efficiencies of Turkish banks by the two-stage data envelopment analysis (DEA) and Malmquist productivity index (MPI). Design/methodology/approach - The authors aim to analyze both the efficiency and productivity of Turkish banks by two-stage DEA and the MPI, which enable decomposing into sub-sections of production processes. Hence, more detailed insight into the Turkish banking system can be presented through two-stage efficiency and production approaches. Findings - DEA results indicate that two out of three state-owned banks achieved resource efficiency while none of the investigated banks performed profit efficiency throughout the investigated period. Besides, average resource efficiency is found higher than average profit efficiency in Turkish banks. MPI results reveal that both technological and technical improvement prospects exist for Turkish banks. Originality/value - The original contribution of this paper is to employ two-stage DEA and the MPI, which reflect both the static and dynamic performance of the Turkish banking sector. In this regard, this study aims to be a pioneer by both reflecting the static and dynamic performance analysis of Turkish banks.

Keywords: Two-stage DEA; Malmquist productivity index; Efficiency; Productivity; Banking (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-07-2023-0338

DOI: 10.1108/JES-07-2023-0338

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