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The Relative Efficiency of Jordanian Banks and its Determinants Using Data Envelopment Analysis

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  • Mohd Mahmoud Ajlouni
  • Mohammad Waleed Hmedat
  • Waleed Hmedat

Abstract

The purpose of this study is to measure the relative efficiency of banks in Jordan using DEA. Also, it investigated the determinants of such efficiency, in terms of bank size and capitalization. The duration of the measured performance of this sector is (2005-2008). The results indicate that average efficiency score of the sample banks is high and stable over time. Another important result is that the relative efficiency of larger banks significantly outperforms smaller and medium size banks, indicating that bank size is a determinant of efficiency. However, banks with higher capital adequacy ratio are less efficient. Thus, commercial banks in Jordan with higher capital adequacy ratio are risk-averse and managing safer and lower-earning portfolios.

Suggested Citation

  • Mohd Mahmoud Ajlouni & Mohammad Waleed Hmedat & Waleed Hmedat, 2011. "The Relative Efficiency of Jordanian Banks and its Determinants Using Data Envelopment Analysis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(3), pages 1-3.
    • Handle: RePEc:spt:apfiba:v:1:y:2011:i:3:f:1_3_3
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    Cited by:

    1. Rasha Istaiteyeh & Maysa’a Munir Milhem & Farah Najem & Ahmed Elsayed, 2024. "Determinants of Operating Efficiency for the Jordanian Banks: A Panel Data Econometric Approach," IJFS, MDPI, vol. 12(1), pages 1-17, January.
    2. Mohammad Abdelkarim Almumani, 2013. "The Relative Efficiency of Saudi Banks: Data Envelopment Analysis Models," 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. 3(3), pages 152-161, July.
    3. Imran Khokhar & Mehboob ul Hassan & Muhammad Nauman Khan & Md Fouad Bin Amin, 2020. "Investigating the Efficiency of GCC Banking Sector: An Empirical Comparison of Islamic and Conventional Banks," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 220-235, January.

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