Cost Efficiency of the Syrian Banking Sector: Using Parametric and Non-Parametric Analysis


Abstract in English

This study aims at measuring the cost performance efficiency of Syrian banking sector during the period 2006-2010. The selected period has been going through a lot of reforms to build an effective, efficient, competitive, and stable banking system. The study employs both parametric Stochastic Frontier Analysis (SFA), and non-parametric Data Envelopment Analysis (DEA). These methods are used to evaluate the cost efficiency of Syrian banks. The study utilizes a one stage SFA model that includes input, outputs and the environmental variables (ownership structure, size, deregulation, market structure, and capital ratio) of cost efficiency measurements. Moreover, the traditional DEA model has been used with the aim of comparing the results of the SFA model. The results of SFA analysis indicate that the cost efficiency of Syrian banks is estimated to be, on average, 58.8%, while the DEA model results shows an average of 69.5%, the results also show that private banks are more efficient than state-owned banks using both SFA and DEA analysis. The study also found that large banks are more efficient than smaller banks.

References used

Al-Hussain, A. H. (2009), Corporate Governance Structure Efficiency and Bank Performance in Saudi Arabia, Doctor of Business Administration Thesis, University of Phoenix, United States
Ariff, M. & Can, L. (2008), "Cost and Profit Efficiency of Chinese Banks: A Non-parametric Analysis", China Economic Review, vol. 19, no. 2, pp. 260-273
Berger, A.N., Hasan, I. & Zhou, M. (2009), "Bank Ownership and Efficiency in China: What will happen in the world’s Largest Nation?" Journal of Banking & Finance, vol. 33, no. 1, pp. 113-130

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