Efficiency Assessment and Determinants of Performance: A Study of Jordan’s Banks Using DEA and Tobit Regression

Rasha Istaiteyeh (), Maysa’a Munir Milhem and Ahmed Elsayed
Additional contact information
Rasha Istaiteyeh: Department of Economics, Faculty of Business, The Hashemite University, Zarqa 13133, Jordan
Maysa’a Munir Milhem: Department of Islamic Economics and Banking, Faculty of Sharia and Islamic Studies, Yarmouk University, Irbid 21163, Jordan
Ahmed Elsayed: Independent Researcher, Amman 11931, Jordan

Economies, 2024, vol. 12, issue 2, 1-18

Abstract: This comprehensive study explored the efficiency landscape of the Jordanian banking industry from 2006 to 2021, utilizing a dual-pronged approach. First, we assessed the efficiency scores of 15 commercial banks, comprising 13 conventional and 2 Islamic institutions, through data envelopment analysis (DEA). Secondly, we investigated the determinants influencing relative efficiency using the Tobit regression model. Our dataset, spanning 240 observations over 16 years, provides a nuanced examination of industry dynamics. DEA, specifically focusing on variable return to scale (VRS), unveils efficiency scores by accounting for scale inefficiencies. The research contributes insights into the operational efficacy of Jordanian banks and provides a robust methodology for understanding efficiency dynamics in the broader financial landscape. The results reveal significant relationships between return on assets, return on equity, GDP growth, and efficiency. Furthermore, it is noteworthy that Islamic banks demonstrate higher efficiency compared to conventional banks. Additionally, non-significant associations were observed with credit risk, bank size, and the ratio of loan loss provision over net income. The findings hold implications for policymakers, industry stakeholders, and researchers aiming to bolster the resilience and competitiveness of Jordan’s banking sector.

Keywords: data envelopment analysis (DEA); Tobit regression model; efficiency; banks; economic development; Jordan (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2227-7099/12/2/37/pdf (application/pdf)
https://www.mdpi.com/2227-7099/12/2/37/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:12:y:2024:i:2:p:37-:d:1331749

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().