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Measuring Bank Performance of Nepali Banks: A Data Envelopment Analysis (DEA) Perspective

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  • Karan S. Thagunna

    (Kathmandu University, School of Management (KUSOM), Nepal.)

  • Shashank Poudel

    (Kathmandu University, School of Management (KUSOM), Nepal.)

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    Abstract

    The aim of this study is to develop a performance model for measuring relative efficiency and potential improvement capabilities of Nepali banks by scrutinizing intermediation aspects. For measuring the efficiency and performance, this paper uses a relatively new frontier approach known as Data Envelopment Analysis (DEA). The paper uses two basic DEA models to fulfill its objectives. This paper seeks to measure and analyze the efficiency levels of banks in Nepal during 2007-08 to 2010-11. The study reveals that efficiency level is relatively stable and has increased on overall. Additionally, it also breaks down the overall efficiency of banks into technical and scale efficiency. This study found no significant relationship with efficiency level and ownership structure of banks and there were no notable differences in the efficiency levels of banks according to their asset size.

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    Bibliographic Info

    Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

    Volume (Year): 3 (2013)
    Issue (Month): 1 ()
    Pages: 54-65

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    Handle: RePEc:eco:journ1:2013-01-6

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    Web page: http://www.econjournals.com

    Related research

    Keywords: Nepal; Data Envelopment Analysis; Bank Performance; Efficiency; Technical Efficiency; Scale Efficiency;

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    References

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    1. Rajiv D. Banker & Robert F. Conrad & Robert P. Strauss, 1986. "A Comparative Application of Data Envelopment Analysis and Translog Methods: An Illustrative Study of Hospital Production," Management Science, INFORMS, INFORMS, vol. 32(1), pages 30-44, January.
    2. Bhattacharyya, Arunava & Lovell, C. A. K. & Sahay, Pankaj, 1997. "The impact of liberalization on the productive efficiency of Indian commercial banks," European Journal of Operational Research, Elsevier, Elsevier, vol. 98(2), pages 332-345, April.
    3. Allen N. Berger & David B. Humphrey, 1997. "Efficiency of financial institutions: international survey and directions for future research," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1997-11, Board of Governors of the Federal Reserve System (U.S.).
    4. David A. Grigorian & Vlad Manole, 2002. "Determinants of Commercial Bank Performance in Transition," IMF Working Papers, International Monetary Fund 02/146, International Monetary Fund.
    5. Sherman, H. David & Gold, Franklin, 1985. "Bank branch operating efficiency : Evaluation with Data Envelopment Analysis," Journal of Banking & Finance, Elsevier, Elsevier, vol. 9(2), pages 297-315, June.
    6. Lewin, Arie Y & Morey, Richard C & Cook, Thomas J, 1982. "Evaluating the administrative efficiency of courts," Omega, Elsevier, Elsevier, vol. 10(4), pages 401-411.
    7. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262061937, December.
    8. Ferrier, Gary D. & Lovell, C. A. Knox, 1990. "Measuring cost efficiency in banking : Econometric and linear programming evidence," Journal of Econometrics, Elsevier, Elsevier, vol. 46(1-2), pages 229-245.
    9. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, Elsevier, vol. 2(6), pages 429-444, November.
    10. Sathye, Milind, 2001. "X-efficiency in Australian banking: An empirical investigation," Journal of Banking & Finance, Elsevier, Elsevier, vol. 25(3), pages 613-630, March.
    11. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, INFORMS, vol. 30(9), pages 1078-1092, September.
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