Estimating Technical Efficiency of Selected Commercial Banks in Ethiopia Using Data Envelopment Analysis

Abstract

The main objective of this study is to estimate the technical efficiency of 13 selected commercial banks in Ethiopia for the period 2010 to 2017 using Data Envelopment Analysis. Both the constant return to scale and variable return to scale efficiency indicate that the state owned bank has better technical efficiency than private banks. Moreover, Dashen Bank Share Company, Awash international bank, United bank Share Company, Nib international bank and Birhan international bank were efficient banks under constant return to scale. Besides, all banks are technically efficient under variable return to scale input oriented except Cooperative bank of Oromia. Finally, Commercial Bank of Ethiopia, Dashen Bank Share Company, United Bank Share Company, Nib International Bank and Birhan international Bank were efficient banks under output oriented constant returns to scale DEA and cooperative bank of Oromia is the only bank that has increasing return to scale in the study period.

Keywords: Data envelopment analysis, returns to scale, input oriented, output oriented