oa Meditari : Research Journal of the School of Accounting Sciences - An empirical study on measuring efficiency and profitability of bank regions

Volume 12, Issue 1
  • ISSN : 1022-2529



When bank managers are asked to comment on the bank's performanceover the past year, most would quote either their bank's return on equityor return on assets. If these measures were higher than those of their peers,the bank is referred to as a high-performance bank. The ratios involved arefinancial ratios and the main problem with this approach is its reliance oncomparable ratios. To find suitable comparable standards (norms) is quitedifficult, and when the standard (norm) is not appropriate, the comparisonmay mislead the analyst. A measurement tool that can compensate for theweaknesses in financial ratios is therefore needed. One such tool that can beused to measure bank performance is Data Envelopment Analysis (DEA).

The objective of this article is to draw a comparison between the resultsof financial ratios (as a conventional performance measurement) and theresults obtained by means of DEA with regard to the performance evaluationof the ten regional offices of one of South Africa's larger banks.

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