An Insight into SBM Efficiency of Slovak Commercial Banks

Vol.5,No.2(2014)

Abstract
The paper investigates into the efficiency of the Slovak banking industry over the years 2000–2011 through the prism of the profit approach to the perception of efficiency of commercial banks. More precisely, the aim of the paper is to benchmark individual commercial banks with respect to their efficiency status under the profit definition of efficiency. Nonetheless, massive structural changes that took place in the Slovak economy also affected significantly the development of the Slovak banking sector and gave rise to shifts in its production function. In order to include these qualitative changes into consideration, the entire period of 12 years was – on economic grounds – divided into three consecutive non-overlapping sub-periods (2000–2003, 2004–2008, 2009–2011) during which the production function may be viewed stable and free of qualitative alterations. A panel of 11 organizational units (i.e. commercial banks) of the Slovak banking sector was identified, and under the assumption of the production function being constant and shiftless in the three sub-periods the data on them were pooled together for each of the three sub-periods. In evaluating their technical efficiency in the individual three sub-periods, a non-parametric method of evaluation is employed based on the slack-based measure (SBM) model of data envelopment analysis. During the period of 12 years examined, Slovenská sporiteľňa maintained a comparatively high SBM technical efficiency and other Slovak banks were subject to positive or negative changes in their comparative efficiency profile. The paper further demonstrates how this information can be used outside the academic sphere with an accent laid upon the stockholders and the management of the commercial banks under investigation.

Keywords:
efficiency; Slovak banking industry; SBM model; the profit approach
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