Benchmarking the operating efficiency of US regional banks Online publication date: Thu, 14-Dec-2017
by D.K. Malhotra; Rashmi Malhotra; Ruben A. Mendoza
International Journal of Business Intelligence and Systems Engineering (IJBISE), Vol. 1, No. 2, 2017
Abstract: Banks, as private entities with a public purpose, strike a balance by achieving high profitability levels while managing the risks involved. Thus, understanding the factors that drive an efficiently-operating bank is an important issue. This study illustrates the use of data envelopment analysis (DEA) methodology to benchmark the operating efficiency of 34 US regional banks during the period 2009 to 2013. The study finds that only three banks out of 34 banks were 100% efficient relative to others throughout the sample period of 2009 to 2013. In addition, we also use the DEA's slack analysis to understand the factors responsible for the poor performance of a bank. Finally, we also investigate the factors contributing to the performance of the banking industry by covering a time period spanning the start of the economic crisis and the consequent passing of new laws to regulate the financial services industry.
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