Measuring efficiency of banks in Saudi Arabia: A data envelopment analysis approach

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The current study investigates the efficiency of banks in Saudi Arabia in terms of technical change and change in total productivity. The study considers ten banks listed on Tadawul as a sample from 2016 to 2021. The Malmquist Data Envelopment Analysis (Malmquist DEA) model is employed to measure banks’ efficiency. Customer deposits and balances with other banks and financial institutions are inputs, while the operating profit and net income are outputs to measure efficiency. The results of efficiency report that most of the Saudi Arabian banks are considerably efficient, while some are marginally efficient. The technical change report results show that Saudi Arabia’s banks are enthusiastic about adopting new technologies that lead to their growth. Further, the results of the change in total productivity show great dynamism among the Saudi Arabian banks to become more productive, which ultimately leads to a more remarkable performance. The study results demonstrate the good performance of Saudi Arabian banks; however, very few banks are marginally efficient in terms of efficiency change. Therefore, the study supports the established hypothesis that there is a significant change in the technical efficiency and total productivity of Saudi Arabian banks.

Acknowledgment
The author(s) acknowledge that the Deanship of Scientific Research supports the current project at Prince Sattam Bin Abdulaziz University under research project number 2022/02/20810.

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    • Figure 1. Change in efficiency of Saudi Arabian banks
    • Figure 2. Change in technology of Saudi Arabian banks
    • Figure 3. Change in total productivity of Saudi Arabian banks
    • Table 1. List of Decision-Making Units (DMUs) selected for the analysis
    • Table 2. List of input and output variables
    • Table 3. Correlation analysis
    • Table 4. MPI models with a combination of different inputs and outputs
    • Table 5. The scores of changes in the efficiency of Saudi Arabian banks
    • Table 6. The scores of technical changes in the efficiency of Saudi Arabian banks
    • Table 7. The scores of total productivity change of Saudi Arabian banks
    • Conceptualization
      Abdul Rahman Shaik
    • Data curation
      Abdul Rahman Shaik
    • Formal Analysis
      Abdul Rahman Shaik
    • Investigation
      Abdul Rahman Shaik
    • Methodology
      Abdul Rahman Shaik
    • Project administration
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    • Resources
      Abdul Rahman Shaik
    • Supervision
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    • Validation
      Abdul Rahman Shaik
    • Visualization
      Abdul Rahman Shaik
    • Writing – original draft
      Abdul Rahman Shaik
    • Writing – review & editing
      Abdul Rahman Shaik