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2014•Unpublished venueRequires access

Technical Efficiency of Domestic Commercial Banks: A Case Study of Pakistan

Farhat Ullah Khan

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Abstract

The study applied Data Envelopment Analysis (DEA) to inspect the technical efficiency of Domestic commercial banks in Pakistan for a period of 2006-2008. Two basic models (CCR and BCC) of DEA were used in their input orientation. The results of 16 banks under CCR model showed that 3 banks were efficient in year 2006 and 2008 while 2 banks were efficient in year 2007. Two banks (HMP and MCB) were efficient throughout the study period. Under BCC model, 6 banks achieved 100 % efficiency level in 2006, 7 banks in 2007 and 8 banks in 2008 showing improvement in managerial efficiency. Two banks namely HMP and MCB were found efficient under Both CCR and BCC models and were also 100 % scale efficient. The results also revealed that technical inefficiency in the banks under study was mainly caused by not operating at optimum scale.

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What this paper is about

The study applied Data Envelopment Analysis (DEA) to inspect the technical efficiency of Domestic commercial banks in Pakistan for a period of 2006-2008. Two basic models (CCR and BCC) of DEA were used in their input orientation. The results of 16 banks under CCR model showed that 3 banks were efficient in year 2006 and 2008 while 2 banks were efficient in year 2007. Two banks (HMP and MCB) were efficient throughout the study period. Under BCC model, 6 banks achieved 100 % efficiency level in 2006, 7 banks in 2007 and 8 banks in 2008 showing improvement in managerial efficiency. Two banks namely HMP and MCB were found efficient under Both CCR and BCC models and were also 100 % scale efficient. The results also revealed that technical inefficiency in the banks under study was mainly caused by not operating at optimum scale.

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Available abstract

The study applied Data Envelopment Analysis (DEA) to inspect the technical efficiency of Domestic commercial banks in Pakistan for a period of 2006-2008. Two basic models (CCR and BCC) of DEA were used in their input orientation. The results of 16 banks under CCR model showed that 3 banks were efficient in year 2006 and 2008 while 2 banks were efficient in year 2007. Two banks (HMP and MCB) were efficient throughout the study period. Under BCC model, 6 banks achieved 100 % efficiency level in 2006, 7 banks in 2007 and 8 banks in 2008 showing improvement in managerial efficiency. Two banks namely HMP and MCB were found efficient under Both CCR and BCC models and were also 100 % scale efficient. The results also revealed that technical inefficiency in the banks under study was mainly caused by not operating at optimum scale.

Key concepts: Data envelopment analysis, Inefficiency, Scale (ratio), Business, Returns to scale, Commercial bank, Industrial organization, Economics

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