Comparative Efficiency Analysis And Evaluation Of Commercial Banks. The Case Of Ethiopian Private Banks Using Dea Approach

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In Ethiopia, Commercial banks are known for their key role in the financial sector, playing vital intermediation roles between lenders and borrowers, hence, they are main economic growth factor in the country; their efficiency should therefore be measured appropriately. The main objective of this study is to measure, evaluate, and analyses comparative efficiency of private commercial banks in Ethiopia for five years period from 2016 to 2020. The study adopted explanatory research design and used secondary data from all 16 private commercial banks` annual report and applies DEA Max pro7 software to extract data and scores. While using the DEA Methodology, the study applies the intermediation approach for an input-oriented data review. The study also selected two inputs and two outputs variables. The inputs variable includes, Total Deposit, and Non-interest Expense, that also encompass, Labour expense, Rent expense and other Operating expenses. The output variable includes, Total loan, Non-Interest Income. During the study, it was found that, the year 2018 had been revealed for having 100% Technical efficiency score for the entire sixteen private banks, the score had proved that all the selected private banks found fully efficient with respect to the selected input and output mix. On the other hand, the study also revealed that larger banks with having more than 18 years of age and those newly joined banks were also 100% efficient banks, these banks can be also taken as a benchmark for they score higher peer frequencies measures, that specify their efficiency. Out of the 16 private banks, 8 of them were the less efficient in terms of resource utilization these were ZB, OIB, CBO, LB, BIB, BUB & AB were among the less efficient banks having some resources underutilized to their peers. The mean efficiency of private commercial banks was 98.8%. According to the outcome of the study mostly the cause of overall technical inefficiency was managerial inefficiency (inefficient utilization of resource such as deposit and non-interest expense) rather than scale inefficiency. The researcher recommends that private banks need to work more towards improving their inefficiency level to ensure equilibrium among peer banks towards technical efficiency and increase their competitiveness at both local and international level.rnKeywords: Peer Frequency, Slack, Technical and Scale Efficiency, Data Envelopment Analysis

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Comparative Efficiency Analysis And Evaluation Of Commercial Banks. The Case Of Ethiopian Private Banks Using Dea Approach

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