Chambers, Nurgul and Cifter, Atilla (2006): The Effect of Scale on Productivity of Turkish Banks in the PostCrises Period: An Application of Data Envelopment Analysis.

PDF
MPRA_paper_2487.pdf Download (192kB)  Preview 
Abstract
The purpose of this paper is to investigate the productivity of Turkish Banks according to the effect of scale in the PostCrises Period. The data used in this study covers the period from 2002:1 to 2004:3. We applied Data Envelopment Analysis (DEA), which is a nonparametric linear programmingbased technique for measuring relative performance of decisionmaking units (DMUs). We calculated DEA as constant & variable returntoscale based on output oriented Malmquist Index. Although the scale effect can be measured with DEA scale efficiency measurement, we used scale indicators as input variables in order to find out not only scale efficiency but also scale affect directly. We applied DEA by using financial ratios (Athanassopoulos and Ballantine, 1995; Yeh, 1996) and branch & personel number indicators. This study uses five input variables as i) branch numbers, ii) personnel number per branch, iii) share in total assets, iv) share in total loans, v) share in total deposits; and five output variables as i) net profitlosses/total assets (ROA), ii) net profitlosses/total shareholders equity (ROE), iii) net interest income/total assets, iv) net interest income/ total operating income, and v) noninterest income/total assets. We find that difference in efficiency is mainly from technical efficiency rather than scale efficiency in the postcrises period. The other finding reveals that efficiency approximate between selected banks and supporting that advantage of scale economies can be lost in Turkish banking. Overall, the results confirm that Turkish banking has U shaped Scale Efficiency on selected profitability ratios. The application of this paper based on other financial ratios with decreasing and increasing returntoscale DEA is left to future research.
Item Type:  MPRA Paper 

Institution:  Marmara University 
Original Title:  The Effect of Scale on Productivity of Turkish Banks in the PostCrises Period: An Application of Data Envelopment Analysis 
Language:  English 
Keywords:  Turkish Banks; Return to Scale; Scale Efficiency; Profit Efficiency; Data Envelopment Analysis 
Subjects:  G  Financial Economics > G2  Financial Institutions and Services > G21  Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C23  Panel Data Models ; Spatiotemporal Models G  Financial Economics > G2  Financial Institutions and Services 
Item ID:  2487 
Depositing User:  Atilla Cifter 
Date Deposited:  02. Apr 2007 
Last Modified:  24. Apr 2015 04:07 
References:  Banker, R., Charnes, A, and Cooper, W.W. (1984), Some models for estimating technical and scale inefficiencies in data envelopment analysis , Management Science, 30, 10781092 Banker, R., Cooper, W. W., Lawrence, M, Seiford, L. M., and Zhu, J. (2004), Return to scale in DEA , Handbook on Data Envelopment Analysis, International Series in Operations Research & Management Series, Vol. 71, Cooper, William W.; Seiford, Lawrence, M.; Zhu, Joe (Eds.) Caves, D.W., Christensen, L.R., and Diewert, W.E. (1982), The economic theory of index numbers and measurement of input, output and productivity , Econometrica, 50, 13931414 Charles, A., Cooper, W.W., and Rhodes, E. (1978), Measuring the efficiency of decision making units , European Journal of Operational Research, 6, 429444. Charles, A., Clark, T., Cooper, W.W., and Golany, B. (1985), A developmental study of data envelopment analysis in measuring the efficiency of maintenance units in U.S. Air Force , In R.Tompson and R.M.Thrall (Eds.), Annals of Operational Research, 2, 95112 Cingi, S., and Tarim, A. (2000), Turk Banka Sisteminde Performans Olcumu: DEAMalmquist TFP Endeksi Uygulamasi , Turkiye Bankalar Birligi Arastirma Tebligleri Serisi, Eylul, 200002 Banker, R., Charnes, A, and Cooper, W.W. (1984), Some models for estimating technical and scale inefficiencies in data envelopment analysis , Management Science, 30, 10781092 Banker, R., Cooper, W. W., Lawrence, M, Seiford, L. M., and Zhu, J. (2004), Return to scale in DEA , Handbook on Data Envelopment Analysis, International Series in Operations Research & Management Series, Vol. 71, Cooper, William W.; Seiford, Lawrence, M.; Zhu, Joe (Eds.) Caves, D.W., Christensen, L.R., and Diewert, W.E. (1982), The economic theory of index numbers and measurement of input, output and productivity , Econometrica, 50, 13931414 Charles, A., Cooper, W.W., and Rhodes, E. (1978), Measuring the efficiency of decision making units , European Journal of Operational Research, 6, 429444. Charles, A., Clark, T., Cooper, W.W., and Golany, B. (1985), A developmental study of data envelopment analysis in measuring the efficiency of maintenance units in U.S. Air Force , In R.Tompson and R.M.Thrall (Eds.), Annals of Operational Research, 2, 95112 Cingi, S., and Tarim, A. (2000), Turk Banka Sisteminde Performans Olcumu: DEAMalmquist TFP Endeksi Uygulamasi , Turkiye Bankalar Birligi Arastirma Tebligleri Serisi, Eylul, 200002 Cooper, W. W., Seiford, L. M., and Zhu, J. (2004), Handbook on Data Envelopment Analysis, International Series in Operations Research & Management Series, Vol. 71, Cooper, William W.; Seiford, Lawrence, M.; Zhu, Joe (Eds.) Coelli, T. (1996) A Guide to DEAP Version 2.1: A Data Envelopment Analysis (Computer) Program , CEPA Working Paper 96/08, Centre for Efficiency and Productivity Analysis, University of New England. Denizer, C.A., Dinc, M., and Tarimcilar, M. (2000), Measuring banking efficiency in the preand portliberalization environment: evidence from Turkish banking system , INFORMS Spring Meeting in Salt Lake, Utah, May 710 Fare, R., Grosskopf, M., Lingren, B., and Pross, P. (1989), Productivty development in Swedish hospital: A Malmquist Output Index approach , Southern Illinois University, Department of Economics Discussion Paper, 893. In: Charles, A., Cooper, W.W., Lewin, A.Y., Seiford, L.S. (Eds.), Data Envelopment Analysis: Theory, Methedology and Applications. Amsterdam: Kluwer Academic Publisher Fare, R., Grosskopf, M., Norris, M., and Zhang, Z. (1994), Productivity growth, technical progress, and efficiency change in industrialized countries , American Economic Review, 84, 6683 Fethi, M.D., Jackson, P.M., and WeymanJones, T.G. (2001), An empirical study of stochastic DEA and financial performance: the case of the Turkish commercial banking industry , University of Leicester, Mimeo Isik, I. and Hassan, M.K. (2002), Technical, scale and allocative efficiencies of Turkish banking industry , Journal of Banking & Finance, 26, Issue 4, 719766 Isik, I. and Hassan, M.K. (2003), Financial deregulation and total factor productivity change: an empirical study of Turkish commercial banks , Journal of Banking & Finance, 27, Issue 8, 14551485 Jackson, P.M., Fethi, M.D. (2000), Evaluating the technical efficiency of Turkish commercial banks: An Application of DEA and Tobit Analysis , University of Leicester, Mimeo Jackson, P.M., Fethi, M.D., and Inal, G. (1998), Efficiency and productivity growth in Turkish commercial banking sector: a nonparametric approach University of Leicester, Mimeo Malmquist, S. (1953), Index numbers and indifference curves , Trabajos de Estatistica, 41, 209242 Mercan M., Reisman, A., Yolalan, R., and Emel, A.B. (2003), The effect of scale and mode of ownership on the financial performance of the Turkish banking sector: results of a DEABased analysis , SocioEconomic Planning Sciences, 37, Issue 3, 185202 Oral, M., and Yolalan, R. (1990), An empirical study on measuring operating efficiency and profitability of bank branches , European Journal of Operational Reseach, 46, Issue 3, 282294 Talluri, S. (2000), Data Envelopment Analysis: Models and Extensions , Decision Line, May Yeh, QJ. (1996), The application of Data Envelopment Analysis in conjunction with financial ratios for bank performance evaluation , Journal of Operational Research Society, 47, 980988 Yildirim, C. (2002), Evolution of banking efficiency within an unstable macroeconomic environment: the case of Turkish commercial banking , Applied Economics, 34, Number 18, 22892301 Yolalan, R. (1996), Turk bankacilik sektoru icin goreli mali performans olcumu , TBBBankacilar Dergisi, Sayi 19, 3540 Zaim, O. (1995), The effect of financial liberalisation on the efficiency of Turkish commercial banks , Applied Financial Economics, 5, 257264 
URI:  http://mpra.ub.unimuenchen.de/id/eprint/2487 