Research ArticleOpen AccessGoogle Scholar indexed
Measuring the X-Efficiency of Saudi Banks: Case Study Pre and Post-Coronavirus Crisis
Department of Accounting, College of Business, University of Jeddah, Jeddah, Saudi Arabia
Department of Accounting, College of Business, University of Jeddah, Jeddah, Saudi Arabia
- 1 Department of Accounting, College of Business, University of Jeddah, Jeddah, Saudi Arabia
- 2 Department of Accounting, College of Business, University of Jeddah, Jeddah, Saudi Arabia
Theoretical Economics Letters·Volume 13 (2023)·Pages 138–148·Published 2 February 2023·DOI10.4236/tel.2023.131008
Copy link · social · email
Abstract
By specifying a translog cost function and applying the DFA (Data Frontier Approach) model, the objective of this paper was to determine the x-efficiency , economies of scale and economies of scope for Saudi banks during the period 2017-2022. Subsequently, the model compares bank efficiency before and af ter corona pandemic. The empirical results indicate that the measure of x-in efficiency (around 7% to 19% of costs) dominates scale inefficiency (around 5% of costs), moreover, there is no difference in efficiency before and after the coronavirus pandemic.
KeywordsCost FunctionX-EfficiencyEconomies of ScaleEconomies of ScopeCoronavirus Pandemic
- Aigner, D., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and Estimation of Stochastic Frontier Production Function Models. Journal of Econometrics, 6, 21-37. https://doi.org/10.1016/0304-4076(77)90052-5
- Allen, L., & Rai, A. (1996). Operational Efficiency in Banking: An International Comparison. Journal of Banking and Finance, 20, 655-672. https://doi.org/10.1016/0378-4266(95)00026-7
- Berger, A. N. (1993). Distribution-Free Estimates of Efficiency in the U.S. Banking Industry and Tests of the Standard Distributional Assumptions. Journal of Productivity Analysis, 4, 261-292. https://doi.org/10.1007/BF01073413
- Berger, A. N., & Humphrey, D. B. (1991). The Dominance of Inefficiencies over Scale and Product Mix Economies in Banking. Journal of Monetary Economics, 28, 117-148. https://doi.org/10.1016/0304-3932(91)90027-L
- Charnes, A., Cooper, W. W., & Rohdes, E. (1978). Measuring the Efficiency of Decision Making Units. European Journal of Operational Research, 2, 429-444. https://doi.org/10.1016/0377-2217(78)90138-8
- Goldberg, L. G., & Rai, A. (1996). The Structure-Performance Relationship for European Banking. Journal of Banking and Finance, 20, 749-771. https://doi.org/10.1016/0378-4266(95)00021-6
- Li, M., Zhu, N., He, K., & Li, M. (2022). Operational Efficiency Evaluation of Chinese Internet Banks: Two-Stage Network DEA Approach. Sustainability, 14, Article No. 14165. https://doi.org/10.3390/su142114165
- Mester, L. J. (1993). Efficiency in the Saving and Loan Industries. Journal of Banking and Finance, 17, 267-286. https://doi.org/10.1016/0378-4266(93)90032-9
- Mester, L. J. (1996). A Study of Banking Efficiency Taking into Account Risk-Preferences. Journal of Banking and Finance, 20, 1025-1045. https://doi.org/10.1016/0378-4266(95)00047-X
- Sealy, C. W., & Lindley, J. T. (1977). Inputs, Outputs and a Theory of Production and Cost at Depository Financial Institutions. Journal of Finance, 32, 1251-1265. https://doi.org/10.1111/j.1540-6261.1977.tb03324.x
- Tulkens, H. (1993). On FDH Efficiency Analysis: Some Methodological Issues and Applications to Retail Banking, Courts and Union Transit. Journal of Productivity Analysis, 4, 183-210. https://doi.org/10.1007/BF01073473