Performance Evaluation of Bank Branches by the DEA-Tobit Model: The Case of Agricultural Bank Branches in Guilan Province

Subject Areas : Data Envelopment Analysis

Hamidreza Alippour ¹ , Gholamreza Mahfoozi ² , Mohsen Shafieyan ³ , Shiva Rezaeyan ⁴

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Received: 2017-12-21 Accepted : 2018-01-19 Published : 2018-12-01

Keywords: Data envelopment analysis, Banking, Tobit analysis, overall technical efficiency,

Abstract :

This paper uses data envelopment analysis (DEA) to examine the technical, pure technical, and scale efficiencies of 12 branches of the agricultural bank in Guilan province, Iran over the period of 2012-2016. The first results indicated that scale inefficiency contributed more to overall technical inefficiency than pure technical inefficiency over the studied period. Results of return to scale reveal that decreasing return to scale is the main form of scale inefficiency. Then, overall technical efficiency scores obtained from DEA was regressed over four factors determining bank efficiency (including bank size, profitability, capital adequacy, and liquidity) by the Tobit method. These four variables influenced efficiency differently. Branch size showed a negative, insignificant relationship with technical efficiency. So, it had no impact on efficiency. Profitability was the main parameter in branch efficiency following by liquidity. Profitability and liquidity influenced efficiency positively and significantly. In other words, larger and more profitable branches have higher technical efficiency.

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