Ranking the Efficiency and Soundness of Business Banks Using a Combined Method of Data Envelopment Analysis and Fuzzy VIKOR

Document Type : Research Paper


1 Department of Accounting, Bandar Abbas Branch, Islamic Azad University, Bandar Abbas, Iran

2 Department of Accounting,Science and Research Branch,Islamic Azad University,Theran,Iran



The present study provides a systematic method for assessing the efficiency and soundness of banks. The analysis is based on a set of benchmarks related to the financial performance of banks. In this regard, this research has explored a model for evaluating accepted banks in Tehran Stock Exchange using the data envelopment analysis method. One of the most important applications of this technique is measuring the efficiency of bank branches. In addition, paying special attention to the health of the banking system corresponds to the health of the society’s economics. It is essential to implement precise analysis benchmarks to evaluate banks and other financial institutions due to their importance in the economics. One of these benchmarks is efficiency. In this study, 18 Iranian business banks have been analysed using data envelopment analysis on the basis of financial ratios. Also, their efficiency has been computed using the output-based CCR envelopment model, assuming a constant efficiency-scale ratio. The results suggest that Gardeshgari bank has been selected as the most efficient and healthy bank between 2011 and 2015 on the basis of financial and non-financial criteria, and using the trapezoidal fuzzy number method.


[1] Ajlouni, M., Hamed, O., Performance Efficiency of the Jordanian Islamic Banks Using Data Envelopment Analysis and FinancialRatios Analysis, European Scientific Journal, 2013, Special Edition (1).
 Doi: 10.19044/esj.2013.v9n19p%25.           
[2] Alem Tabriz, A., Rajabi, A.,and Zareian, M., Investigating the Role of Fuzzy Topsis Technique in Improving the Detection of Banks Issues Using DEA Techniques, Industrial Management Journal, Autumn and Winter, 2009, 1(3), P.118-99. Doi: 10.22111/JMR.2012.684.
[3] Asosheh, A., Nalchigar S.,and Jamporazmey M., Information Technology Project Evaluation: An Integrated Data Envelopment Analysis and Balanced Scorecard Approach, Expert Systems with Applications, 2010, 37, P.5931–5938. Doi: 10.1016/j.eswa.2010.02.012.
[4] Azad, A.S.M., Suzuki, Y., Victor, F., Amirul, A., Impact of Policy Changes on the Efficiency and Returns-to-Scale of Japanese Financial Institutions: An Evaluation, Research in International Business and Finance, 2014, 32, P. 159–171. Doi: 10.1016/j.ribaf.2014.05.001.
[5] Behrouz, A., Imami Meybodi, A., Measurement of Technical, Allocation and Economic Efficiency of Iran's Agriculture Using Non-Parametric Method, Journal of Agricultural Economics Research, 2014, 6(3), Autumn 1303, P.43-66, (in Persian).
[6] Esfandiar, M., Saremi ,M., Jahangiri Nia,H., Assessment of the Efficiency of Banks Accepted in Tehran Stock Exchange Using the Data Envelopment Analysis Technique, Advances in Mathematical Finance and Applications, 2018, 3(2), P.1-11, Doi: 10.22034/AMFA.2018.540815
[7] Ghafourian, H., and Melati, A., Inputs and Outputs in Islamic Banking System, Iranian Journal of Management Studies (IJMS), 2014, 7(1), P.175-188. Doi:10.22059/IJMS.2014.36207.
[8] HadiNezhad, M., Nazarian, R.and Piri, F., Efficiency of public and private banks on the Basis of Electronic Banking Indices though Data Envelopment Analysis, Journal of Economic Sciences, 2013, 7(23), (in Persian).
[9] Islami Bigdeli, G., Kashanipour, M., Comparison and Evaluation of Methods for Calculating the Efficiency of Bank Branches and Providing a Proper Model, Journal of Accounting and Auditing, 2004, 11(38), P. 3-27. (in Persian).
[10] Izadikhah, M., Improving the Banks Shareholder Long Term Values by Using Data Envelopment Analysis Model, Advances in Mathematical Finance & Applications, 2018, 3(2), P. 27– 41.
[11] Izadikhah, M., Khoshroo, A., Energy management in crop production using a novel fuzzy data envelopment analysis model, RAIRO-Oper. Res., 2018, 52(2), P. 595-617, Doi:10.1051/ro/2017082
[12] Kamal, M., Optimization of Staff Numbers Inthe Process Industries: An Application of DEA, International journal of Manpower, 2000, 21(3), Doi:10.1108/01437720010319453.
[13] Kamvysi, K., Gotzamani, K., Georgiou, A.C.,and Andronikidis, A., Integrating DEAHP and DEANP into the Quality Function Deployment, The TQM Journal, 2010, 22(3), P.293-316.
[14] Mohagheghnia, M., Ebrahimi, S.,and Mehrabi, L., Efficiency Evaluation of Non-lucre Banks in Iran in Comparison to Other Islamic Countries through Data Envelopment Analysis, Quarterly Journal of Economic Strategy, 2015, 4(13),(in Persian).
[15] Mohamed, M. M., Modeling the Efficiency of top Arab Banks: A DEA–Neural Network Approach Expert Systems with Applications, 2007, 36, P.309–320. Doi: 10.1016/j.eswa.2007.09.001.
[16] Mostafa, M. M., Modeling Islamic Eanks ’ Efficiency: a Nonparametric Frontier Approach, InternationalJournal of Islamic and Middle Eastern Finance and Management, 2011, 4(1), P.7-29. Doi.:10.1108/17538391111122186.
[17] Mokhtar, H., Abdullah, N. and Alhabshi, S., Efficiency and Competition of Islamic Banking in Malaysia, Humanomics, 2008, 24 )1(, P. 28-48. Doi: 10.1108/08288660810851450
[18] Murphy, N. B., and Orgler, Y. E., Cost analysis for Branching Systems:Methodology, Test Results, and Implications for Management. Journal of Financial Research, 1982, 5, P.181-188. Doi.:10.1111/j.1475-6803.1982.tb00059.x.
[19] Ramanathan, R., Performance of Banks in Countries of the Gulf Cooperation Council, International Journal of Productivity and Performance Management, 2007, 56(2), P.137-154. Doi:10.1108/17410400710722635.
 [20] Rostami, M., Ghasemi, J,.and Eskandari, F., Performance Evaluation of Approved Banks in Tehran Stock Exchange Center (TOPSIS Logic in Data Envelopment Analysis), Management-Accounting Magazine, Spring 2011, 4-1 (8), P-19-30. (in Persian).
[21] Schweser, C., and Temte, A., Efficiency Analysis of UAE Banks Usingdata Envelopment Analysis, Journal of Economic and Administrative SCIENCES, 2013, 29(1), P. 4-20, Doi: 10.1108/10264111311319204.
 [22] Shabahang, R., and Borhani, H., Efficiency Evaluation of Iranian Business Banks and Its Relationship with Organizational and Financial Aspects, Journal of Banking and Economics,1998, 2, P.52-58. (in Persian).
[23] Soteriou A.C., Stavrinides, Y., An Internal Costumer Service Quality Data Envelopment Analysis Model for Bank Branches, Int J oper prod Man, 1997, 17 (7-8), P.780-789. Doi:10.1108/01443579710175556.
[24] Sufian, F., The Efficiency of Islamic Banking Industry in Malaysia: Oreign vs Domestic Banks, Humanomics, 2007, 23) 3), P.174-192. Doi:10.1108/08288660710779399.
[25] Tone, K., Toloo, M., Izadikhah, M., A modified slacks-based measure of efficiency in data envelopment analysis, European Journal of Operational Research, 2020, 287(2), P. 560-571, Doi: 10.1016/j.ejor.2020.04.019.
[26] Tlig, H., and Ben, H., Assessing the Efficiency of Commercial Tunisian Banks using Fuzzy Data EnVelopment Analysis, Journal of Data Envelopment Analysis and Decision Science, 2017, 2, P.14-27. Doi:10.5899/2017/dea-00146.