How to Choose a Nonparametric Frontier Model? Technical Efficiency of Turkish Banks Assessing Global

Abstract

This article aims to address current gaps in the literature on banking efficiency using the data envelopment analysis (DEA) model. The study assesses the technical efficiency of the Turkish banking sector in the period spanning from 1990 to 2010 in-line with DEA model. In comparison with the DEA model, the CCR model (developed by Charnes, Cooper & Rhodes, European Journal of Operational Research, 1978, 2(6): 429–444) does not need model assumptions on input/output orientation. It also avoids the dilemma about the choice of input/output indicators. The comparison analysis of this study reveals that the CCR model yields more significant efficiency results than the BCC model (developed by Banker, Charnes & Cooper, Management Science, 1984, 30(9): 1078–1092). This study provides important contribution to the current empirical research on banking efficiency. The empirical results of the study reveal a steady increase in global efficiency of the Turkish banking sector over the past two decades. The future research could focus on the behavioural aspects of bank efficiency (e.g., managerial practices). The study also offers managerial implications.