Investigation of the efficiency of the Azerbaijan banking system with Data Envelopment Analysis (2015–2019)
DOI:
https://doi.org/10.15584/nsawg.2024.3.8Keywords:
DEA, BCC model, CCR model, super efficiency, Azerbaijan banking systemAbstract
The primary objective of this research was to assess the efficiency of banks within the Azerbaijani banking system, identifying and comparing both efficient and inefficient banks. To this end, the efficiency of 25 banks operating in Azerbaijan from 2015 to 2019 was analysed using input-oriented CCR, BCC and Super Efficiency models. The results provide insights into the efficiency levels of the banks and highlight the distinctions between efficient and inefficient institutions. Furthermore, recommendations for improving inefficient banks were developed, with the expectation that these suggestions could enhance the effective use of resources within the banking system. The study estimates a significant increase in banking system efficiency over the years, and this improvement is believed to reflect the positive impact of reform and enhancement efforts.
References
Balci, E., Ayvaz, B. (2020). Efficiency and productivity analysis in Turkish banking sector with Data Envelopment Analysis and Malmquist index. Southeast Europe Journal of Soft Computing, 9(1), 9–23. DOI: 10.21533/scjournal.v9i1.185.
Banker, R.D., Charnes, A., Cooper, W.W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30(9), 1078–1092. DOI: 10.1287/mnsc.30.9.1078.
Benston, G.J. (1965). Branch Banking and Economies of Scale. Journal of Finance, 20(2), 312–331. DOI: 10.1111/j.1540-6261.1965.tb00212.x.
Berger, A., Humphrey, D. (1997). Efficiency of Financial Institutions: International Survey and Directions for Future Research. European Journal of Operational Research, 98(2), 175–212. DOI: 10.1016/S0377-2217(96)00342-6.
Beridze, J., Anbar, A. (2019). Efficiency Analysis in Georgian Banking Sector: An Application of Data Envelopment Analysis. Business & Management Studies: An International Journal, 7(2), 1076–1096. DOI: 10.15295/bmij.v7i2.1127.
Charnes, A., Cooper, W.W., Rhodes, E. (1978). Measuring the Efficiency of Decision Making Units. European Journal of Operation Research, 2, 429–444. DOI: 10.1016/0377-2217(78)90138-8.
Coelli, T., Prasada, D.S., Battese, G.E. (1998). An introduction to efficiency and productivity analysis. Boston: Kluwer Academic Publisher. DOI: 10.1007/b136381.
Cooper, W.W., Lawrence, W., Seiford, M., Zhu, J. (2011). Handbook on Data Envelopment Analysis. Second Edition. London: Springer New York Dordrecht Heidelberg.
Cooper, W.W., Seiford, L.M., Tone. K. (2007). Data Envelopment Analysis: A Comprehensive Text with Models, Applications, References and DEA-Solver Software. Boston: Kluwer Academic Publishers. DOI: 10.1007/978-0-387-45283-8.
Čiković, K.F., Keček, D., Cvetkoska, V. (2023). The Impact of COVID-19 on Bank Effi¬ciency in the Western Balkans: A DEA Approach. Naše gospodarstvo/Our Economy, Sciendo, 69(1), 29–42. DOI: 10.2478/ngoe-2023-0004.
Drake, L., Hall, M.J.B., Simper, R. (2009). Bank Modelling Methodologies: A Comparative Non-parametric Analysis of Efficiency in the Japanese Banking Sector. Journal of International Financial Markets, Institutions and Money, 19(1), 1–15. DOI: 10.1016/j.intfin.2007.05.002.
Dutta, P., Jain, A., Gupta, A. (2020). Performance analysis of non-banking finance companies using two-stage data envelopment analysis. Annals of Operations Research, 295, 91–116, DOI: 10.1007/s10479-020-03705-6.
Hammami, H., Ngo, T., Tripe, D., Vo, D.T. (2022). Ranking with a Euclidean common set of weights in data envelopment analysis: with application to the Eurozone banking sector. Annals of Operations Research, 311, 675–694. DOI: 10.1007/s10479-020-03759-6.
Hjalmarsson, L., Andersson, I., Mlima, A. (2000). Swedish Banking Efficiency and Productivity in an International Perspective, Estocolmo: Supplement Number 28 to the Government Inquiry on the International Competitiveness of the Swedish Financial Sector.
Humphrey, D.B. (1985). Costs and scale economies in bank intermediation. In: R.C. Aspinwall, R.A. Eisenbeis (eds.), Handbook for Banking Strategy (pp. 745–783). New York: John Wiley and Sons.
Kumar, S., Gulati, R. (2008). An examination of technical, pure technical, and scale efficiencies in Indian Public Sector Banks using data envelopment analysis. Eurasian Journal of Business and Economics, 1(2), 33–69.
Kutlar, A., Babacan, A. (2008). A Comparison of the Effectivity of Cumhuriyet University with State Universities: An Application of DEA Technique. KOSBED, 15, 148–172.
Kutlar, A., Salamov, F. (2016). Evaluation of Effectiveness of Azerbaijan Public Hospitals with Data Envelopment Analysis. KOSBED, 31, 1–17.
Küçükaksoy, I., Selcan, O. (2013). Türk bankacılık sektöründe faaliyet gösteren bankaların etkinliklerinin veri zarflama analizi yöntemi ile ölçülmesi: 2004–2011 yılları uygulaması. Ekonometri & İstatistik e-Publisher, 18, 56–80.
Li, F., Wu, L., Zhu, Q., Yu, Y., Kou, G., Liao, Y. (2020). An Eco-inefficiency dominance probability approach for Chinese banking operations based on data envelopment analysis, Complexity in Economics and Business, 3780232, 1-14. DOI: 10.1155/2020/3780232.
Sealey, C.W. Jr., Lindley, J.T. (1977). Inputs, Outputs, and a Theory of Production and Cost at Depository Financial Institutions. Journal of Finance, 32(4), 1251–1266.
Seiford, L.M., Thrall, R.M. (1990). Recent Developments in DEA: The Mathematical Programming Approach to Frontier Analysis. Journal of Econometrics, 46(1–2), 7–38. DOI: 10.1016/0304-4076(90)90045-U.
Torun, N. (2020). Sağlık Hizmetlerinde etkinlik ölçümü. Ankara: Gazi.
Tsionas, M.G. (2020). A coherent approach to Bayesian data envelopment analysis. European Journal of Operational Research, 281(2), 439–448, DOI: 10.1016/j.ejor.2019.08.039.
Yagubov, S., Yagubov, U. (2020). The efficiency of Azerbaijani banks: an empiric analysis. In: 55th International Scientific Conference on Economic and Social Development, 3, Jun 18/Jun 19, 2020, Baku/Azerbaijan, pp. (581–587). Varazdin: Book of Proceedings.
Yeşilyurt, Ö., Salamov, F. (2017). Evaluation of Efficiency and Factors influencing the Efficiency in the Health Systems of Turkic States with Super-efficiency and Tobit Models. Balkan and Near Eastern Journal of Social Sciences, 3(2), 128–138.
Yuksel, S., Mukhtarov, S., Mammadov, E. (2016). Comparing the efficiency of Turkish and Azerbaijani banks: An application with data envelopment analysis. International Journal of Economics and Financial Issues, 6(3), 1059–1067.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 University of Rzeszow
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
