Bootstrap-DEA efficiency: Radial and non-radial approaches in the banking industry

Subject Areas : Financial Economics

mohamadreza  pahle ¹ (Ph.D. Candidate, Department of Economics, Firuzkuh Branch, Islamic Azad University, Firuzkuh, Iran; [e-mail])
mahdi  fathabadi ² (Assistant professor at Firuzkuh Branch, Islamc Azad University, Firuzkuh, Iran (Crossponding Authur), [e-mail])
parvane  salatin ³ (Assistant Professor, Department of Economics, Firuzkuh Branch, Islamic Azad University, Firuzkuh, Iran; [e-mail])

Received: 2023-10-25 Accepted : 2024-03-02 Published : 2024-02-10

Keywords: Efficiency, Bootstrap, Data Envelopment Analysis, Bank.,

Abstract :

This article aims to assess the efficiency of 15 stock market banks over the period 2014-2022. Utilizing non-parametric radial efficiency (Debreu-Farrell efficiency) and non-radial efficiency (Russell efficiency) methods, we analyze constant, non-increasing, and variable return-to-scale technologies. Recognizing limitations within radial methods, bias-corrected technical efficiency is also estimated using bootstrap data envelopment analysis. Radial analysis reveals inefficiency among all banks except for the Middle East bank. The average Debreu-Farrell efficiency stands at 77% under constant return to scale and 82% under variable return to scale, while the average Russell efficiency is 58% and 67% respectively. These results suggest slack in Debreu-Farrell efficiency. Bootstrap efficiency findings reveal underestimation in both radial and non-radial efficiency, thereby overstating actual efficiency levels. Bias-corrected radial technical efficiency scores from the bootstrap approach indicate inefficiency across all banks, with Dey and Sarmaye banks exhibiting particularly poor performance. Thus, adopting appropriate strategies such as non-performing loan management, increased non-interest incomes, and reduced operational costs is imperative to enhance efficiency.

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