Investigating Efficiency of Mellat Bank Branches in the North Khorasan Province by Using DEA ApproachKhorasan Province Using DEA Approach

اقتصاد پولی مالی

Article 3, Volume 22, Issue 9, January 2016, Pages 74-99   

Document Type: پژوهشی

DOI: 10.22067/pm.v22i9.52776

Authors

mahin dokht kazemi^{* 1}; Hadise Gerivani²

¹Ferdowsi University of Mashhad

²Ferdowsi University of Mashhad, Iran

Abstract

Efficiency is the (often measurable) ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without waste.In more mathematical or scientific terms, it is a measure of the extent to which input is well used for an intended task or function (output). It often specifically comprises the capability of a specific application of effort to produce a specific outcome with a minimum amount or quantity of waste, expense, or unnecessary effort. Efficiency of course refers to very different inputs and outputs in different fields and industries.
In recent years, financial institutions have experienced a dynamic, fast-paced, and competitive environment at a cross-border scale. One of the fastest growing industries is banks.The banking industry around the globe has been transformed in recent years by unprecedented consolidation and cross-border activities.The bank efficiency ratio is a quick and easy measure of a bank's ability to turn resources into revenue. An increase in the efficiency ratio indicates either increasing costs or decreasing revenues. Considering efficiency of banks in each country is one of the main fundamentals of the financial market and a necessary step to achieve economic growth and development.Especially, in recent years with addition managementresponsibility, this matter became premiere. An efficient bank with use of human force, Deposits, Buildings, equipment and materials obtain output and efficient maximum.
A Famous method for efficient calculationis DEA method.Data envelopment analysis (DEA) is a nonparametric method in operations research and economics for the estimation of production frontiers.It is used to empirically measure productive efficiency of decision making units (or DMUs). Although DEA has a strong link to production theory in economics, the tool is also used for benchmarking in operations management, where a set of measures is selected to benchmark the performance of manufacturing and service operations.Data Envelopment Analysis (DEA) has been recognized as a valuable analytical research instrument and a practical decision support tool. DEA has been used for both production and cost data. Utilizing the selected variables, such as unit cost and output, DEA software searches for the points with the lowest unit cost for any given output, connecting those points to form the efficiency frontier. Any company not on the frontier is considered inefficient. A numerical coefficient is given to each firm, defining its relative efficiency. Different variables that could be used to establish the efficiency frontier are: number of employees, service quality, environmental safety, and fuel consumption.
As regards, banks accept control on their branches operation and work in this study we measured the efficiency of Mellat bank branches in the North Khorasan province for the years 1386-1388. The studies are in four distinct categories: (1)Presentation of past research short description, (2)Present of Data envelopment analysis (DEA) method, research model and variables,(3)Interpretation of model estimation result, (4) researchDeduction and suggestion.
Types of performance calculated in this study are consist of technical efficiency, allocative efficiency and economic efficiency that they are investigated with two assumption constant returns to scale (CRS) and variable returns to scale (VRS). Technical efficiency is the effectiveness with which a given set of inputs is used to produce an output. A firm is said to be technically efficient if a firm is producing the maximum output from the minimum quantity of inputs, such as labor, capital and technology. Allocative efficiency is a state of the economy in which production represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing. Economic efficiency is implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one person would harm another. The CRS assumption only may operate, if corporation isoperated in optimum scale. The various questions caused institution don’t operation inoptimum scale, for example:competitive effects, financial constraint and whatnot.The CRS assumption, as long as,all institutes don’t operation inoptimum scale,technical efficiencyamounts is computed will be disturbed.In use ofvariable returns to scale is cause technical efficiency (Inclusive:scale efficiency quantity and management efficiency) analyze exactly.
In the DEA method use two variablespack: A) entry variable (inputs), B)output variables. Accordingly, the research variables was determinant according to the Intermediate attitude, therefore the input variables are including deposits, fixed assets and personnel and the output variables are including interest-free loans and facilities in the form of swap contracts.
The research results show that in average three-year(1386-1388), technical efficiency, allocation efficiency and economic efficiency, with assumption of the CRS, respectively were 0/747, 0/79, 0/59, and with assumption of the VRS, were 0/91, 0/88 and 0/80. Also, in years 1386 to 1388, respectively 33, 27 and 40 percent of branches in both CRS and VRS were efficient. Furthermore, the average economic performance in both CRS and VRS has not changed much. Although, resultswith assumption of theVRS have superioraverage, but that operation only show Short termefficiency and short termefficiencysize cannot be suitable criterion for adjustmentefficiencyrecovery plan.

Keywords

Technical Efficiency; allocative efficiency; economic efficiency; DEA

References

[1] Abdaly, A. ;dosty, Sh.;nikbakht. A. R.(2009). The Designing of efficiencyValuation and Gradationmodel of Tejart bankbranchs with use DAE Method, Bank and Economy, 98-100, 16-20, 46-50. (In Persian)

[2] Abrahimy, S.(1385).Survey Esfahangovernmental banks efficiency with use DAE Method,EconomicResearch, 3(4), 75-93.(In Persian)

[3] Abryshamy, H. ;Mehara, M. ; Ajorlo, M. (1387), Survey of sumptuary efficiency in bank system:Mellat bank case Study, EconomicBulletin, 8(1), 173-197. (In Persian)

[4] Abtahy, s.h. ;kazemi, b. (1378), Efficiency, Tehran: Institute of Commercial reading and research. (In Persian)

[5] AL-shanmari.;solimi. (1998).Modeling the operating efficiency of banks: a nonparametric methodology. Logistics Information Management, 11(1), 5-17.(In English)

[6] AmamyMeybody, E. (1379), Doctrine of efficiency (Scientific and Application), Tehran: Institute of Commercial reading and research.(In Persian)

[7] Anayiotos, G.; others.(2010).The efficiency of emerging Europs banking sector before and after the recent economic crisis. International Monetary Fund, 247-267.(In English)

[8] Bauer, P.W.; others. (1998). Consistency conditions for regulatory analysis of financial instituions; a comparisonof frontier efficiency methods. Forthcoming journal of economics and business, 97(2).(In English)

[9] Berg,S.A.; others.(1993). Banking Efficiency in the Nordic Countries. Journal of Banking and Finance, 17, 371-388.(In English)

[10] Berger, A.; Humphrey, D.B. (1998). Measurement and efficiency. (In English)

[11] Coelli,t. (1996). A Guide to DEA version 2.1: Data envelopment analysis (computer) Program,Departman of econometrics university of New England, Armidail, 1-49.(In English)

[12] Coelli,T.; others.(1997),An Introduction to Efficiency and Productivity Analysis. United States of America: Springer. (In English)

[13] Dadgar, Y. ; Nick Nemat, Z. (1386), Application DEA model in economic units evaluation, Case Study: Tejart bank wardenships, Jastarhay-e- economic, 4(7), 11-54. (In Persian)

[14] Dash,M.; Charles,Ch. (2009). A study of technical efficiency of banks in India. Social Science Electronic Publishing. (In English)

[15] Fare,R.; Lovell, C. A. K. (1978). Measuring the Technical fficiency. Journal of Economic Theory, 19(1), 150-162.(In English)

[16] Haghyghat, g.; Nasiry, n. (1382), Survey of bank systemefficiency with use of DEA metod, Case study: Keshavarzy bank, economicresearch, 9(171), 10-135. (In Persian)

[17] Hoseany, S.H. ;Sory, A.r. (1386), Estimation of efficiency Iran banks andeffective ingredient on it, economicresearch, 7(2), 127-155. (In Persian)

[18] Hoseanzadeh-e-Bahrainy, M.H. ; Najy, E. ; Chamanegir, F, (1387), The Compare of economic efficiency governmental and private banks in Iran with use DAE Method, Danesh and development, 5(25), 1-30. (In Persian)

[19] Iran CenteralBnke, (1388), Economic report and balance sheet 1386, Tehran: Office of peruse economic policys. (In Persian)

[20] Islamic University Malaysia. 1-141.

[21] Issues in commercial banking. National Bureau of Economic Research,92(1), 245-300. (In English)

[22] Kashanipor, M. ;Ghazizade, M. (1387), Identify of effectiont variables and Ratios in measure effeciont bank branches,Daneshvar, 15(32), 93-108. (In Persian)

[23] Khtaea, M.; Usefy-e- Hajyabad, R. (1386),Valuate OF technical efficiency of Maskan bankwith use of DEA metod,Program and Budget, 12(2), 55-84. (In Persian)

[24] Mehregan, M. R. (1383), Quantity models in evaluation organization operation,Tehran: Tehran univercityIssue.(In Persian)

[25] Mohd,Z. ; NorAiza, B. (2007). Efficiency of Islamic and conventional commercial banks in Malaysia (2000-2004). Department of Economics National University of Singapore, 288-315.(In English)

[26] Nafar, N. (1380), Evaluation technical efficiency of human force in Iran banks, Bank and Economic, 22, 27-36. (In Persian)

[27] Rabinz, S. (1384), Organization theory, (Alvany and Danaeafard), Tehran: Safar. (In Persian)

[28] Staub, R.B. (2009). Evolution of Bank Efficiency in Brazil: A DEA Approach.TheBanco Central doBrasil, 200, 3-48.(In English)

[29] Taheryan, M. (1388),Survey efficiency in process of give out electricity corporation,M.A. thesis, Ferdowsi university of Mashhad (In Persian)

[30] TulueyAshlaghy, A.; HoseanyKhezry, M. (1386), Evaluation purchase unites of gas corporation with use of DEA metod,Technical review, 38, 23-27. (In Persian)

[31] Usefy, k.h. ;Hafezy, B. (1386), efficiency in banking industrial, case Study: Esfahangovernmental banks, researchs and policysSeasonal, 39(57), 27-40. (In Persian)