Efficiency measurement of Turkish banking system

Ateş, Ferhun. The Efficency Measurement of Turkish Banking System, Master?s Thesis, Ankara, 2007.This study presents the efficiency analysis of deposit banks operating in Turkey for a 5-year period covering 2002-2006. In the study, input oriented approach is used and the changes in the efficiency and productivity under the assumption of variable returns on scale by using Data Envelopment Analysis method. In order to distinguish the effect of technological developments, Malmquist Production Index is also calculated. Furthermore, as there is no consensus on what are the inputs and/or outputs of the banking sector, all of ?Production?, ?Intermediation? and ?Profitability? approaches are considered.The results of analysis were evaluated in banking sector basis and also evaluated in bank groups basis. Study results showed that, according to Production approach, average technical efficiency of banks showed fluctuating trend throughout the years and there were little increase during the five-year analysis period. In other words, banks were able to produce more output than input as to managerial efficiency during that period. Besides, there were nearly no changes in the production functions of the banks under study. Calculation of Malmquist Production Index also showed that there was an increase in total factor productivity on average.According to Intermediation approach, the average technical efficiency degree of banks increased during the period. This shows that after the crisis Turkish Banking sector streghtened to carry out this very important function. Overall, there was a slight increase in the Malmquist Production Index.According to Profitability approach, average technical efficiency degree showed increasing trend. The number of efficient banks and average efficiency degrees was less than that of production and intermediation approach. According to Malmquist Production Index, total factor productivity decreased during the analysis period. This decrease resulted from the adverse effect of the changes in technological and managerial efficiency.In investigating the correlation among Production, Intermediation and Profitability, the study proved that, there is a correlation on the same magnitude between production, profitability and intermediation functions during study period.Key Words1.Efficiency2.Productivity3.Production4.Intermediation5.Profitability