Measuring the Efficiency of Banks' Performance Based on Economic Policies Using Data Envelopment Analysis

Document Type: Research Paper

Authors

1 Department of Industrial Engineering, Payame Noor University, Tehran, Iran

2 Department of Industrial Engineering, University of Tehran, Tehran, Iran

10.22075/ijnaa.2020.4380

Abstract

Due to long-term and all-compassing sanctions and the instability of political engagements with the other countries, Iran's economy more than ever should adjust its governance system to minimize economic Problems. As the most important financial institution, banks play an important role in the national economy. Considering the present and future economic conditions, the banks management always tries to improve banking services, marketing, innovation in service delivery, competition with other banks, considering the current and future economic conditions. Therefore, one of the goals of banks is to increase economic efficiency. Data envelopment analysis is a mathematical model to evaluate the relative efficiency of decision-making units. In this study, the efficiency of 83 first-class branches of Mellat Bank was analyzed using data envelopment analysis during 2016 and 2017 with an input-based approach and assuming a variable return to scale. In order to achieve efficiency, three inputs of effective deposits, loan, delayed debts, and an input of profit and loss were used. Finally, the efficiency of the branches was calculated using the Malmquist index. The research data were collected through the bank's annual report and analyzed using Lingo and Eviwes software. The present study is aimed to obtain the effectiveness of the bank's management using a three-stage data envelopment analysis. According to the results obtained after adjusting the environmental factors and statistical disturbance and comparing with the efficiency obtained before adjusting the inputs, it was found that environmental variables have a significant effect on the effectiveness of bank branches. According to the results of this research, it can be concluded that in many cases, the ineffectiveness of managers can be related to environmental and uncontrollable factors of managers, rather than to the manager's qualification.

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