Performance Evaluation in Bank Branch with Two-Stage DEA Model


Department of Mathematics Science and Research Branch, Islamic Azad University Tehran, Iran


Data Envelopment Analysis (DEA) has been applied in
many studies in the banking sector. Conventional DEA models consider
the system as a single-process black box. There are however a number of
so-called network DEA approach that consider the system as composed
by distinct processes or stages, each one with its own inputs and outputs
and with intermediate flows among the stages. In this paper some of
these approaches that have been applied to banking sector are reviewed
and in particular applications of two-stage DEA to Iranian banking
branches are presented and discussed. The conclusions of this research
are that two-stage DEA models have a greater discrimination power
than conventional, single-process DEA and since they allow a more finegrained
analysis their results are generally more valid and useful. The
main drawback is the need for more detailed data (i.e. at the process
level) and the greater complexity of the resulting models, especially if
there are inputs or outputs that are shared among the processes.