A hybrid MCDM approach for performance evaluation in the banking industry

Abstract

Purpose This paper aims to propose a hybrid multiple criteria decision-making (MCDM) technique for performance evaluation of banks in which the banks are assessed and ranked according to the criteria of the balanced scorecard (BSC) methodology and corporate social responsibility (CSR) views. Design/methodology/approach To clarify the performance of the proposed model, the MCDM technique was implemented in four banks in Iran as a pilot. First, proper criteria for banking industry are identified considering BSC and CSR. Consequently, analytic hierarchy process (AHP) and modified digital logic (MDL) techniques are used to determine the weights of criteria. The banks are ranked by fuzzy TOPSIS (FTOPSIS) and fuzzy VIKOR (FVIKOR). Using a combination of these techniques, four methods, namely, AHP-FTOPSIS, AHP-FVIKOR, MDL-FTOPSIS and MDL-FVIKOR, are obtained, each of which provides a different set of rankings for banks. Eventually, the obtained ranks are integrated using the Copeland method. Findings The results showed that the return on investment, debt ratio and lower energy consumption criteria are the most important, and enhancement of brand value, increasing customer loyalty and environmental care criteria have the lowest percentage of importance. Also, the final bank ranking is determined by the proposed method. Originality/value This paper identifies 6 criteria and 25 sub-criteria for evaluating the banks considering BSC and CSR viewpoints including some new sub-criteria that has not been considered before. Moreover, these hybrid approaches and especially MDL techniques have not been used by previous researchers.