An Analysis of Profitability and Marketability Efficiencies of Indian Public and Private Banks
DOI:
https://doi.org/10.17010/ijf/2014/v8i1/71981Keywords:
Banks
, Profitability, Marketability, Efficiency, Data Envelopment Analysis (DEA)G21
Paper Submission Date
, March 2, 2013, Paper sent back for Revision, April 29, Paper Acceptance Date, June 15, 2013.Abstract
The purpose of this study is to analyze the performance of Indian public and private banks by applying the data envelopment analysis (DEA) on a sample of 34 banks by considering the time period from 2006 to 2010. This study reveals that Indian public (nationalized and State Bank group) and private banks underperformed in terms of marketability and profitability efficiency. However, they were performing relatively better in terms of profitability efficiency as compared to the stock market performance (marketability efficiency). Specifically, these inefficiencies are explained by the ownership of the banks, and not by their size. Furthermore, there is little evidence of any impact of the financial crisis on the Indian banking system as evident from the sudden drop of marketability efficiency levels. However, it got recovered by the end of the study period.Downloads
Downloads
Published
How to Cite
Issue
Section
References
Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30 (9), 1078-1092.
Berger, A. N., & Humphrey, D. B. (1997). Efficiency of financial institutions: International survey and directions for future research. European Journal of Operational Research, 98 (2), 175-212. DOI : http://dx.doi.org/10.1016/S0377-2217(96)00342-6
Bhattacharyya, A., Lovell, C. A. K., & Sahay, P. (1997). The impact of liberalization on the productive efficiency of Indian commercial banks. European Journal of Operational Research, 98(2), 332-345. DOI : http://dx.doi.org/10.1016/S0377-2217(96)00351-7
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2 (6), 429-444. DOI : http://dx.doi.org/10.1016/0377-2217(78)90138-8
Chatterjee, G. (2006). Is inefficiency of banks in India a cause for concern? Evidence from the post-reforms era. Journal of Emerging Market Finance, 5 (2), 151-182. DOI: 10.1177/097265270600500203
Das, A. (1997). Technical, allocative and scale efficiency of public sector banks in India. RBI Occasional papers, 18 (2&3), 279-301.
Das, A., & Ghosh, S. (2006). Financial deregulation and efficiency: An empirical analysis of Indian banks during the post reform period. Review of Financial Economics, 15(3), 193-221. DOI : http://dx.doi.org/10.1016/j.rfe.2005.06.002
Das, A., Nag, A., & Ray, S. C. (2005). Liberalization, ownership and efficiency in Indian banking: A nonparametric analysis. Economic and Political Weekly, 40 (12),1190-1197.
Golany, B., & Roll, Y. (1989). An application procedure for DEA. Omega, 1 (3), 237-250.
Ho, B. C. - T. (2008). Measuring profitability and marketability in Internet companies. The Open Management Journal, 1 (14), 12-25.
Ho, C. T., & Zhu, D. S. (2004). Performance measurement of Taiwan's commercial banks. International Journal of Productivity and Performance Management, 53 (5), 425-434. DOI: 10.1108/17410400410545897
Kao, C., & Hwang, S. - N. (2008). Efficiency decomposition in two-stage data envelopment analysis: An application to non-life insurance companies in Taiwan. European Journal of Operational Research, 185 (1), 418-429. DOI : http://dx.doi.org/10.1016/j.ejor.2006.11.041
Lo, S. - F., & Lu, W. - M. (2006). Does size matter? Finding the profitability and marketability benchmark of financial holding companies. Asia-Pacific Journal of Operational Research, 23 (02), 229-246.
Luo, X. (2003). Evaluating the profitability and marketability efficiency of large banks: An application of data envelopment analysis. Journal of Business Research, 56 (8), 627-635. DOI : http://dx.doi.org/10.1016/S0148-2963(01)00293-4
McAllister, P. H., & McManus, D. (1993). Resolving the scale efficiency puzzle in banking. Journal of Banking & Finance, 17 (2-3), 389-405. DOI : http://dx.doi.org/10.1016/0378-4266(93)90039-G
Miller, S. M., & Noulas, A. G. (1996). The technical efficiency of large bank production. Journal of Banking & Finance, 20 (3), 495-509. DOI : http://dx.doi.org/10.1016/0378-4266(95)00017-8
Monthly economic Analysis (2006, January). http://www.indiainbusiness.nic.in/business-news/news-bulletin/monthlyanalysis-jan.pdf
Ray, S. C. (2004). Data envelopment analysis: theory and techniques for economics and operations research. Cambridge : Cambridge University Press.
Ray, S. C., & Das, A. (2010). Distribution of cost and profit efficiency: Evidence from Indian banking. European Journal of Operational Research, 201 (1), 297-307. DOI : http://dx.doi.org/10.1016/j.ejor.2009.02.030
Seiford, L. M., & Zhu, J. (1999). Profitability and marketability of the top 55 US commercial banks. Management Science, 45 (9), 1270-1288.
Sensarma, R. (2005). Cost and profit efficiency of Indian banks during 1986-2003: A stochastic frontier analysis. Economic and Political Weekly, 40 (12),1198-1209.
Sensarma, R. (2008). Deregulation, ownership and profit performance of banks: Evidence from India. Applied Financial Economics, 18 (19), 1581-1595. DOI:10.1080/09603100701720385
Tsolas, I. E. (2011). Relative profitability and stock market performance of listed commercial banks on the Athens Exchange: A non-parametric approach. IMA Journal of Management Mathematics, 22(4), 323-342. DOI: 10.1093/imaman/dpq017
Zaim, O. (1995). The effect of financial liberalization on the efficiency of Turkish commercial banks. Applied Financial Economics, 5 (4), 257-264. DOI:10.1080/758536876
Zhu, J., & Shen, Z.-H. (1995). Discussion of testing DMUs' returns to scale. European Journal of Operational Research, 81 (3), 590-596.
