Efficiency and its determinants in the Algerian banks: network data envelopment analysis and partial least squares regression
International Journal of Productivity and Performance Management
ISSN: 1741-0401
Article publication date: 21 December 2021
Issue publication date: 17 May 2023
Abstract
Purpose
The purpose of this paper is to evaluate the efficiency of Algerian banks and examine the effects of explanatory factors on their performance.
Design/methodology/approach
In this paper, a methodology of two-stage network data envelopment analysis (DEA) is used to explore the efficiency of a sample of 13 Algerian banks during the 2013–2017 period. In the first stage, the network DEA is used to assess the overall and stages efficiencies. In the second stage, the partial least squares (PLS) regression is conducted to determine the potential effects of explanatory factors on stages efficiency.
Findings
The main empirical results indicate that Algerian banks need an efficiency improvement in both stages. The overall efficiency of the Algerian banking system improves over the study period. The deposit producing efficiency is positively affected by bank size and bank age. The revenue earning efficiency is negatively associated with bank size and bank age. The domestic banks are more efficient than foreign banks in the deposit producing stage and the foreign banks are more efficient than domestic banks in the revenue earning stage.
Practical implications
The results might be used as guidelines for both managers and policymakers in order to improve banks and banking system performance.
Originality/value
To the best of our knowledge, this study is the first that uses the DEA in investigating the efficiency of Algerian banks by dividing the overall efficiency into deposit producing and revenue earning efficiencies. Unlike most studies that have usually used OLS regression, Tobit regression and bootstrapped truncated regression, this study is the first in the bank efficiency literature that uses PLS regression to investigate the potential effect of explanatory variables on deposit producing and revenue earning efficiencies.
Keywords
Acknowledgements
The author is grateful to Mrs. Mounira Derouag for her language help. The author would like to thank the two anonymous reviewers for their valuable comments.
Citation
Achi, A. (2023), "Efficiency and its determinants in the Algerian banks: network data envelopment analysis and partial least squares regression", International Journal of Productivity and Performance Management, Vol. 72 No. 5, pp. 1479-1508. https://doi.org/10.1108/IJPPM-07-2021-0407
Publisher
:Emerald Publishing Limited
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