Banks’ efficiency and credit risk analysis using by-production approach: the case of Iranian banks

Ruhul Salim, Amir Arjomandi and K. Hervé Dakpo

Applied Economics, 2017, vol. 49, issue 30, 2974-2988

Abstract: This article uses a by-production approach that integrates credit risk to monitor bank efficiency. The method overcomes the possible misspecification issues of the commonly assumed weak disposability (WDA) of undesirable outputs. In addition, our measure extends the classic by-production approach by including statistical aspects through subsampling techniques. We have also provided an algorithm to correct related infeasibilities. Using this approach, we investigate the performance of Iranian banks and credit risk management in the sector for the period 1998–2012. Non-performing loans (NPLs) have been used as an undesirable output and proxy for credit risk in our models. Based on our empirical results, although the banks generally exhibited efficiency improvements over time, their credit risk performance deteriorated considerably after the regulatory changes introduced in 2005. These findings confirm that credit quality can be monitored more actively across Iranian banks.

Date: 2017
References: View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2016.1251567 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:49:y:2017:i:30:p:2974-2988

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2016.1251567

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().