Performance Evaluation of Bank Branches by the DEATobit Model: The Case of Agricultural Bank Branches in Guilan Province

This paper employed data envelopment analysis (DEA) to examine the technical, pure technical, and scale efficiencies of 12 branches of the agricultural bank in Guilan province, Iran over the period of 2012-2016. The first results indicated that scale inefficiency contributed more to overall technical inefficiency than pure technical inefficiency over the studied period. Results of return to scale revealed that the decreasing return to scale is the main form of the scale inefficiency. Then, overall technical efficiency scores obtained from DEA was regressed over four factors underpinning bank efficiency (including bank size, profitability, capital adequacy, and liquidity) by the Tobit method. These four variables influenced efficiency differently. Branch size showed a negative, insignificant relationship with technical efficiency. So, it had no impact on efficiency. Profitability was the main parameter in branch efficiency followed by liquidity. Profitability and liquidity influenced efficiency positively and significantly. In other words, larger and more profitable branches were found to have higher technical efficiency.