Evaluating the efficiency of Saudi banks: An empirical study

Abstract

This dissertation examines the technical, pure technical and scale efficiency for Saudi banks in the recent period (2015–2019). The non-parametric technique Data Envelopment Analysis (DEA) is utilized in order to calculate efficiency scores. In addition, the Intermediate Approach which looks at banks as intermediary institutions is incorporated with DEA. The results show that on average Saudi banks have maintained a high level of efficiency across all three categories. Islamic banks have exhibited higher efficiency scores in both technical and pure technical categories in comparison with conventional banks. However, results show that conventional banks are more efficient in terms of scale efficiency. Size of a bank, in terms of total assets, and efficiency are found to have no relationship. Medium banks are operating more efficiently than large and small banks. These results might provide useful information to regulatory bodies and managers of banks.