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The Relative Efficiency of Saudi Banks: Data Envelopment Analysis Models

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  • Mohammad Abdelkarim Almumani

    ()
    (King Saud University-RCC)

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    Abstract

    The purpose of this study is to measure the relative efficiency of banks in Saudi Arabia using a basic DEA models like CCR and BCR. Also, it investigated the determinants of such efficiency in terms of bank size and capitalization. The duration of the measured performance of the Saudi banking sector is (2007-2011). The results indicate that, on a relative scale, Saudi banks were efficient in the management of their financial resources. In addition, it was found that efficiency score of the selected banks is high and stable over time and the management of the banks consistently improved their efficiency during the period. Another important result is that the relative efficiency of Saudi smaller banks significantly outperforms much better than medium and larger size banks. However, banks with higher capital adequacy ratio are less efficient. Thus, banks in Saudi Arabia with higher capital adequacy ratio are less risky, managing safer and lower-earning portfolios. This study provides a starting point for further investigation and validation into the efficiency of the Saudi banking sector; also it can provide important information for policy makers as for the openness of Saudi new banks. Therefore, more investigation with alternative models are required.

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    Bibliographic Info

    Article provided by Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences in its journal International Journal of Academic Research in Accounting, Finance and Management Sciences.

    Volume (Year): 3 (2013)
    Issue (Month): 3 (July)
    Pages: 152-161

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    Handle: RePEc:hur:ijaraf:v:3:y:2013:i:3:p:152-161

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    Web page: http://hrmars.com/index.php/pages/detail/Accounting-Finance-Journal

    Related research

    Keywords: Saudi Banking Efficiency; Saudi Financial System; data Envelopment Analysis; Technical Efficiency; Scale Efficiency;

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Saeed Al-Muharrami, 2009. "The competition and market structure in the Saudi Arabia banking," Journal of Economic Studies, Emerald Group Publishing, vol. 36(5), pages 446-460, October.
    2. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
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