Analyzing Internal Efficiency Dynamics Of Turkish Banks: Activity Based Multi-Objective Dynamic DEA Model And Its Application

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Tekiner Kaya
Yetkin Cinar

Keywords

Multi Activity Window-DEA, Decision Making Sub-Unit (DMSU), Dynamic Efficiency, Tobit Regression

Abstract

Efficiency measurement is an important analysis for institutions in order to investigate their performance comparatively. On the other hand, evaluating efficiency of institutions carrying out more than one activity using common resources is important management problems. Since both efficiency and priorities may change in time, the problem set is getting more complex.

Sub-activities of total system (Decision Making Sub-Units/DMSU) of institutions may act in different ways since they have different priorities or goals. In addition, factors effecting efficiencies of these DMSUs may differ. Each DMSUs' countermeasures can vary in order to reach the efficient frontier. Therefore, total system efficiency results may not represent the DMSUs' efficiencies.

In line with these inferences, the aim of this study is to analyze efficiency differences between DMUs and DMSUs in terms of their behaviors, efficiencies and countermeasures in a dynamic manner. A hybrid non-parametric dynamic efficiency evaluation model, "Multi-Activity Window Data Envelopment Analysis (MA-WDEA)", is developed first[1]. Then, internal dynamics of DMUs and DMSUs are analyzed via dynamic returns to scale(RTS) analysis and Tobit regression models. Both analysis are established on efficiency results of the MA-WDEA model.

The proposed process is applied to measure the performance of Turkish banking system. The results first show that MA-WDEA is a suitable tool to measure efficiency trends of DMUs/DMSUs. There exist important differences among Turkish banks with respect to their operating and non-operating activities’ efficiencies. The results of the dynamic RTS and regression models also show that behavioral attitudes of DMUs and DMSUs are significantly different.

[1] The developed hybrid model is first presented in 3rd International Conference on Governance, Management and Entrepreneurship in Crotia by Kaya and Cinar, (2015).

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