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Modeling bank branch profitability and effectiveness by means of DEA

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  • Ioannis E. Tsolas

Abstract

Purpose - The purpose of this paper is to provide a framework for evaluating the overall performance of bank branches in terms of profitability efficiency and effectiveness. Design/methodology/approach - Applying a two‐stage DEA model to a sample of bank branches of a large commercial bank in Greece this study disaggregates overall performance into profitability efficiency and effectiveness. Findings - The results indicate that superior insights can be obtained by employing the proposed two‐stage DEA model compared to the outcomes from the analysis based on selected key performance indicators (KPIs). Some relations between profitability efficiency and effectiveness are also investigated. Originality/value - The study highlights the importance of encouraging increased profitability and efficiency throughout the branch network of the commercial bank under study.

Suggested Citation

  • Ioannis E. Tsolas, 2010. "Modeling bank branch profitability and effectiveness by means of DEA," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 59(5), pages 432-451, June.
    • Handle: RePEc:eme:ijppmp:v:59:y:2010:i:5:p:432-451
    DOI: 10.1108/17410401011052878
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    Citations

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    Cited by:

    1. Mohammad Rezaei & Saeedeh Ketabi, 2016. "Ranking the Banks through Performance Evaluation by Integrating Fuzzy AHP and TOPSIS Methods: A Study of Iranian Private Banks," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(3), pages 19-30, July.
    2. Lozano, Sebastián, 2016. "Slacks-based inefficiency approach for general networks with bad outputs: An application to the banking sector," Omega, Elsevier, vol. 60(C), pages 73-84.
    3. Ioannis Tsolas, 2015. "Firm credit risk evaluation: a series two-stage DEA modeling framework," Annals of Operations Research, Springer, vol. 233(1), pages 483-500, October.
    4. Memić Deni & Škaljić-Memić Selma, 2013. "Performance Analysis and Benchmarking of Commercial Banks Operating in Bosnia and Herzegovina: a DEA Approach," Business Systems Research, Sciendo, vol. 4(2), pages 17-37, December.
    5. LaPlante, A.E. & Paradi, J.C., 2015. "Evaluation of bank branch growth potential using data envelopment analysis," Omega, Elsevier, vol. 52(C), pages 33-41.
    6. Rahman, Mahabubur & Lambkin, Mary & Hussain, Dildar, 2016. "Value creation and appropriation following M&A: A data envelopment analysis," Journal of Business Research, Elsevier, vol. 69(12), pages 5628-5635.
    7. Paradi, Joseph C. & Zhu, Haiyan, 2013. "A survey on bank branch efficiency and performance research with data envelopment analysis," Omega, Elsevier, vol. 41(1), pages 61-79.
    8. Debmallya Chatterjee & Amol S. Dhaigude, 2020. "An Integrated Fuzzy Cognitive Map Approach in Modelling Factors of Management Quality in Banking Performance," Global Business Review, International Management Institute, vol. 21(3), pages 763-779, June.

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