Data Envelopment Analysis and Decision Science
Volume 2015, No. 1 (2015), Pages 32-49
Article ID dea-00090, 18 Pages
Zimbabwe commercials banks efficiency and productivity analysis through DEA Malmquist approach: 2002-2012
Jacob Muvingi1 *, Suggest Hotera1
1Harare Institute of Technology, Ganges Road Belvedere Harare, Zimbabwe
* Corresponding author. Email address: email@example.com. Tel: +2634741429
Received: 27 August 2014; Accepted: 24 October 2014
Copyright © 2015 Jacob Muvingi and Suggest Hotera. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Majority of data envelopment analysis studies have been focused on developed economies and economies in Asia, and very few studies on developing economies particularly African economies. This research aims to determine bank efficiency and productivity change of Zimbabwean commercial banks. The DEA model was used to measure the efficiency of 10 commercial banks working in Zimbabwe. The intermediation approach was used to specify variables. The average scores of technical efficiency under the Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS) assumptions for the commercial banking sector as a whole are 70.95% and 81.5% respectively. The average scale efficiency for commercial banks operating in Zimbabwe was found to be 73.7%.Through applying the Malmquist Productivity Index (MPI) method; it was found that the mean total factor productivity increase for Zimbabwean commercial banks from 2003 to 2012 is 13.8%. The results also showed that the total factor productivity index peaked in 2009 where it reached a value of 121.1% and reached the lowest point in 2005 were it went down to (-52%).
Keywords: Efficiency, Productivity, DEA, Malmquist, Commercial Banks; Zimbabwe
P. Bauer, Recent Developments in the Econometric Estimation of Frontiers, Journal of Econometrics, (1990) 39-56.
Paul W. Bauer, Allen N. Berger, Gary D. Ferrier, David B. Humphrey, Consistency conditions for regulatory analysis of financial institutions: a comparison of frontier efficiency methods, Journal of Economics and business, (1998) 85-114.
George J. Benston, Branch banking and economies of scale, The Journal of Finance, (1965) 312-331.
Allen N. Berger, David B. Humphrey, Efficiency of financial institutions: International survey and directions for future research, European journal of operational research, (1997) 175-212.
Allen N. Berger, David B. Humphrey, The dominance of inefficiencies over scale and product mix economies in banking, Journal of Monetary Economics, (1991) 117-148.
Allen N. Berger, Loretta J. Mester, Inside the black box: What explains differences in the efficiencies of financial institutions? Journal of Banking & Finance, (1997) 895-547.
Allen N. Berger, Gerald A. Hanweck, David B. Humphrey, Competitive viability in banking: Scale, scope, and product mix economies, Journal of Monetary Economics, (1987) 501-520.
R. D. Banker, A. Charnes, W. W. Cooper, Some Models for Estimating Scale Efficiency in Data Envelopment Analysis, Management Science, (1984) 1078-1092.
L. Cavallo, S. P. S. Rossi, Do environmental variables affect the performance and technical efficiency of European banking systems? A parametric analysis using the stochastic frontier approach, European Journal of Finance, (2002)123-146.
D. W. Caves, L. R. Christensen, W. E. Diewert, The economic theory of index numbers and the measurement of input, output, and productivity, Econometrica, 50 (6) (1982) 1393-1414.
S. Chansarn, The relative efficiency of Commercial Banks in Thailand: A DEA approach, International Research Journal of Finance and Economics, (2008) 53-68.
A. Charnes, W. W. Cooper, E. Rhodes, Measuring the efficiency of decision making units, European journal of operational research, (1978) 429-444.
W. W. Cooper, J. Zhu, Handbook on Data Envelopment Analysis, Kluwer Academic Publishers, (2004).
A. F. Darrat, C. Topuz, T. Yousef, Assessing Cost and Technical Efficiency of Banks in Kuwait, ERF 8th Annual Conference in Cairo, (2002).
L. Drake, M. J. B. Hall, R. Simper, The impact of macroeconomic and regulatory factors on bank efficiency: A non-parametric analysis of Hong Kong's banking system, Journal of Banking and Finance, (2006) 1443-1466.
Rolf Färe, S. Grosskopf, Malmquist productivity indexes and Fisher ideal indexes, The Economic Journal, (1992) 158-160.
Kablan, Sandrine, Measuring bank efficiency in developing countries: The case of WAEMU (West African Economic Monetary Union), African Economic Research Consortium, (2007) 113-138.
C. Koopmans, Tjalling, An analysis of production as an efficient combination of activities." In An analysis of production as an efficient combination of activities, John Wiley and Sons, (1951).
J. Maudos, J. M. Pastor, F. Pérez, J.Quesada, Cost and profit efficiency in European banks, Journal of International Financial Markets, Institutions and Money, 12 (2002) 33-58.
Kankana Mukherjee, Subhash C. Ray, Stephen M. Miller, Productivity growth in large US commercial banks: The initial post-deregulation experience, Journal of Banking & Finance, (2001) 913-939.
S. Phochathan, W. Krasachat, K. N. Pompech, W. Sanguanwongwan, Efficiency Measurement and Productivity Change in the Thai Banking Industry Before and After the Economic Crisis (1993-2006), PhD Thesis, Singapore: Singapore Economic Review Conference, (2009).
RBZ, Monetary Policy Statement, Reserve Bank of Zimbabwe, (2014).
C. W. Sealey Jr, James T. Lindley, Inputs, outputs, and a theory of production and cost at depository financial institutions, The Journal of Finance, (1977) 1251-1266.
Sufian, Fadzlan, The impact of the Asian financial crisis on bank efficiency: The 1997 experience of Malaysia and Thailand, Journal of International Development, (2006) 866-889.
Kaoru Tone, A slacks-based measure of efficiency in data envelopment analysis, European journal of operational research, (2001) 498-501.
Canan Yildirim, Evolution of banking efficiency within an unstable macroeconomic environment: the case of Turkish commercial banks, Applied Economics, (2002) 2289-2301.
Yousif, H. Ashour, Measuring the Technical Efficiency of the Banking Sector in Palestine using the Data Envelopment Analysis Approach, PhD Thesis, (2007).