THE EFFECTS OF RISK ON THE EFFICIENCY OF IRANIAN BANKS BASED ON DEA METHOD

Two important and essential issues of banking industry are efficiency and risk, and any measure take to improve and promote the efficiency of banking systems leads to the improvement of saving, investment, and allocation of sources, and potential possibilities existing nationwide are employed for the public development and prosperity. On the other hand, top management of banks requires an efficient mode to evaluate the performance and assess the efficiency of branches to rank then. Therefore, this research aims to evaluate the efficiency and ranking of banks and select an optimal model, and recognize the effects of credit, operating and market risks on the efficiency of banks.  For this purpose, three banks (Melli, Saderat, and Mellat) have been selected as the statistical population of the research (within the period from 2009 to 2011) for a monthly study during 36 months. In the model of the research, DEA method has been used to study the efficiency of banks. In this regard, the variables including number of branches, volume of bank deposit, and total expenditures, have been selected as the input of the model, and the variables including volume of facilities, and total income has been selected as the output of the model. The technical, managerial, and scale efficiency of each bank has been calculated using DEA model. Moreover, the surplus of production factors and optimal value of input and output has been provided for each bank. To study the effects of these three risks on the efficiency of banks, a model has been developed based on the selected indices using econometric method of ordinary least squares (OLS). The results indicate that the ratio of the dishonored facilities to the total provided facilities selected as the index of credit risk is in significant relation with the efficiency.