Technical Efficiency of Jordanian Banking Sector Based on DEA Approach
Abstract
This study examines efficiency levels of the Jordanian banking sector (13 domestic and 3
foreign banks) over the period 1996 to 2007, by estimating a non-parametric approach (Data
Envelopment Analysis). The study also investigates the trends in estimated efficiency
scores. Results indicate that large banks appear to be more efficient than small banks and
domestic banks appear to be more efficient than foreign banks. Arab Bank is found to be the
most technically efficient among large banks and Capital Bank of Jordan is found to be on
average more technically efficient among all the medium banks also among the entire
sample.
References
Ahmad, T. (2000). The efficiency of the banking system in Jordan (Unpublished Ph.D
thesis). Colorado State University, USA.
Annual Report (various issues).Published for Each Bank for each year separately.
Annual Report (2007). Association of Banks in Jordan.
Annual Report (various issues). Published by Central Bank of Jordan.
Avkiran (1999). The evidence on efficiency gains: The role of mergers and the benefits to the
public. Journal of Banking & Finance, 23 (7), 991-1013.
Berger, A., & Humphrey, D. B. (1992). Megamergers in banking and the use of cost
efficiency as an antitrust defense. Antitrust Bulletin, 37, 541-600.
Bhattacharya, K. (2003). How good is the bank scope database? A cross-validation
exercise with correction factors for market concentration measures (BIS Working
Paper 133). Basel: Bank for International Settlements.
Casu, B., & Molyneux, P. (2003). A comparative study of efficiency in European banking.
Applied Economics, 35, 1865-1876.
Cinca, C. S., Molinero, C. M., & Garcia, F. C. (2004). Behind DEA efficiency in financial
institutions’s. Discussion Papers in Accounting & Finance AF02. University of
Southampton.
Coelli, T. (1996). A guide to deep version 2.1: A data envelopment analysis (computer)
program (CEPA Working Paper 96/08). Australia: Department of Economics,
University of New England.
Terengganu International Finance and Economics Journal
Volume 1, Issue 1: 11-24, 2011
24
Cooper, W., Seiford, L., & Kaoru, T. (2000). Data envelopment analysis; A
comprehensive text with models, application, references and DEA-solver software.
Boston: Kluwer Academic Publishers.
Colwell, R. J., & Davis, E. P. (1992). Output and productivity in banking. Scandinavian
Journal of Economics, 94, 111-129.
Dyson R. G., Allen R., Camanho A. S., Podinovski V. V., Sarrico C. S., & Shale E. A. (2001).
Pitfalls and protocols in DEA. European Journal of Operational Research, 59,
132-245.
Ehrmann, M., Gambacorta, L., & Martinez-Pages, J. (2001). Financial systems and the role
of banks in monetary policy transmission in the euro area. Discussion Paper 432.
Italy: Bank of Italy.
Favero, C. A., & Papi, L. (1995). Technical efficiency and scale efficiency in the Italian
banking sector: A non-parametric approach. Applied Economics, 27, 385-395.
Ferrier, G. D., & Lovell, C. A. K. (1990). Measuring cost efficiency in banking: Econometric
and linear programming evidence. Journal of Econometrics, 46, 229-245.
Fried, H. O., Lovell, C. A. K., & Eechaut, P. V. (1993). Evaluating the performance of U.S
credit unions. Journal of Banking & Finance, 17, 251-265.
Jamal I., Bdour, Abeer F., & Al-Khoury. (2008). Predicting change in bank efficiency in
Jordan: A data envelopment analysis. Journal of Accounting & Organization Change,
4, 162-181.
Kourouche, K. (2008). Measuring Efficiency and productivity in the australian banking sector
(Unpublished Ph.D thesis). University of Western Sydney, Australia.
Leong, W. H., Dollery, B., & Coelli, T. (2002). Measuring the technical efficiency of banks in
Singapore for the period 1993 to 1999: An application and extension of the Bauer et
al., (1997) technique (Paper Series in Economics 10). University of New England, 1-
28.
Maghyereh, A. (2004). The effect of financial liberalization on the efficiency of financial
institutions: the case of Jordanian commercial banks (Working Paper Series).
Retrieved from http://ssrn.com/abstract=436420.
Paul, S., & Kourouche, K., (2008). Regulatory policy and the efficiency of the banking sector
in Australia. Australian Economic Review, 41, 260-271.
Sathye, M. (2001). X-efficiency in Australian banking: An empirical investigation. Journal of
Banking & Finance, 25, 613-30.
Isik, I., Gunduz, L., & Omran, M. (2008). Managerial and scale efficiency in the MENA
banking: A panel study of the Jordanian banking sector (Working Paper Series).
Retrieved from http://ssrn.com/abstract=494224.
Wheelock, D. C., & Wilson, P. W. (1995). Evaluating the efficiency of commercial banks:
Does our view of what banks do matter? Review, 77, 39-52.
Worthington, A. C. (2001). Efficiency in pre-merger and post-merger non-bank financial
institutions. Managerial and Decision Economics, 22(8), 439-52.
thesis). Colorado State University, USA.
Annual Report (various issues).Published for Each Bank for each year separately.
Annual Report (2007). Association of Banks in Jordan.
Annual Report (various issues). Published by Central Bank of Jordan.
Avkiran (1999). The evidence on efficiency gains: The role of mergers and the benefits to the
public. Journal of Banking & Finance, 23 (7), 991-1013.
Berger, A., & Humphrey, D. B. (1992). Megamergers in banking and the use of cost
efficiency as an antitrust defense. Antitrust Bulletin, 37, 541-600.
Bhattacharya, K. (2003). How good is the bank scope database? A cross-validation
exercise with correction factors for market concentration measures (BIS Working
Paper 133). Basel: Bank for International Settlements.
Casu, B., & Molyneux, P. (2003). A comparative study of efficiency in European banking.
Applied Economics, 35, 1865-1876.
Cinca, C. S., Molinero, C. M., & Garcia, F. C. (2004). Behind DEA efficiency in financial
institutions’s. Discussion Papers in Accounting & Finance AF02. University of
Southampton.
Coelli, T. (1996). A guide to deep version 2.1: A data envelopment analysis (computer)
program (CEPA Working Paper 96/08). Australia: Department of Economics,
University of New England.
Terengganu International Finance and Economics Journal
Volume 1, Issue 1: 11-24, 2011
24
Cooper, W., Seiford, L., & Kaoru, T. (2000). Data envelopment analysis; A
comprehensive text with models, application, references and DEA-solver software.
Boston: Kluwer Academic Publishers.
Colwell, R. J., & Davis, E. P. (1992). Output and productivity in banking. Scandinavian
Journal of Economics, 94, 111-129.
Dyson R. G., Allen R., Camanho A. S., Podinovski V. V., Sarrico C. S., & Shale E. A. (2001).
Pitfalls and protocols in DEA. European Journal of Operational Research, 59,
132-245.
Ehrmann, M., Gambacorta, L., & Martinez-Pages, J. (2001). Financial systems and the role
of banks in monetary policy transmission in the euro area. Discussion Paper 432.
Italy: Bank of Italy.
Favero, C. A., & Papi, L. (1995). Technical efficiency and scale efficiency in the Italian
banking sector: A non-parametric approach. Applied Economics, 27, 385-395.
Ferrier, G. D., & Lovell, C. A. K. (1990). Measuring cost efficiency in banking: Econometric
and linear programming evidence. Journal of Econometrics, 46, 229-245.
Fried, H. O., Lovell, C. A. K., & Eechaut, P. V. (1993). Evaluating the performance of U.S
credit unions. Journal of Banking & Finance, 17, 251-265.
Jamal I., Bdour, Abeer F., & Al-Khoury. (2008). Predicting change in bank efficiency in
Jordan: A data envelopment analysis. Journal of Accounting & Organization Change,
4, 162-181.
Kourouche, K. (2008). Measuring Efficiency and productivity in the australian banking sector
(Unpublished Ph.D thesis). University of Western Sydney, Australia.
Leong, W. H., Dollery, B., & Coelli, T. (2002). Measuring the technical efficiency of banks in
Singapore for the period 1993 to 1999: An application and extension of the Bauer et
al., (1997) technique (Paper Series in Economics 10). University of New England, 1-
28.
Maghyereh, A. (2004). The effect of financial liberalization on the efficiency of financial
institutions: the case of Jordanian commercial banks (Working Paper Series).
Retrieved from http://ssrn.com/abstract=436420.
Paul, S., & Kourouche, K., (2008). Regulatory policy and the efficiency of the banking sector
in Australia. Australian Economic Review, 41, 260-271.
Sathye, M. (2001). X-efficiency in Australian banking: An empirical investigation. Journal of
Banking & Finance, 25, 613-30.
Isik, I., Gunduz, L., & Omran, M. (2008). Managerial and scale efficiency in the MENA
banking: A panel study of the Jordanian banking sector (Working Paper Series).
Retrieved from http://ssrn.com/abstract=494224.
Wheelock, D. C., & Wilson, P. W. (1995). Evaluating the efficiency of commercial banks:
Does our view of what banks do matter? Review, 77, 39-52.
Worthington, A. C. (2001). Efficiency in pre-merger and post-merger non-bank financial
institutions. Managerial and Decision Economics, 22(8), 439-52.
Published
2011-02-13
How to Cite
JREISAT, Ammar; PAUL, Satya.
Technical Efficiency of Jordanian Banking Sector Based on DEA Approach.
Terengganu International Finance and Economics Journal (TIFEJ), [S.l.], v. 1, n. 1, p. 11 - 24, feb. 2011.
ISSN 2232-0539.
Available at: <https://myjms.mohe.gov.my/index.php/tifej/article/view/1576>. Date accessed: 11 sep. 2024.
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