Using Non-Parametric Approach to Measure Profit Efficiency in Libyan Commercial Banks

Khalad M. S. Alrafadi

Khalad M. S. Alrafadi

Keywords: efficiency, data envelopment analysis, Libyan commercial banks, public commercial banks, private commercial banks

Abstract

In this study, the performance of eight Libyan commercial banks between 2004 and 2010 is compared. There aren't many studies that analyze the efficiency levels of the Libyan banking sector and then look at its determinants using both the Data Envelopment Analysis (DEA) and Tobit regression model, according to the pertinent literature. In this study, the DEA was used to determine the profit effectiveness of sampling banks. In the second stage, the Tobit regression model was also used to identify potential efficiency-related parameters. The results show that public commercial banks have shown to be more efficient at making profits than private commercial banks. The results of the efficiency determinants showed that there was a positive relationship between bank efficiency and size of operation (SO) and a negative relationship between bank performance and return on investment (ROA). The findings of this study's conclusion have some consequences for policy.

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