Cost and Profit Efficiency in the Jordanian Commercial Banks Parametric and Nonparametric Approaches for Estimating Efficiency

Nedal A. Al-Fayoumi, Ezeddin M. Alkour

Abstract


This study aimed at assessing, analyzing and comparing cost, standard profit and alternative profit efficiency benchmarks for the fifteen Jordanian Commercial Banks listed on Amman Stock Exchange during the period 1993 to 2004. The methodology was based on two modern methods for assessing cost and profit frontier: the Data Envelopment Analysis (DEA) and Stochastic Frontier (SF).

The results of this study revealed the presence of a substantial deviation of optimal frontier; that besides a significant difference in the estimated level of efficiency a cross banks, resulted, thereby in lower means of cost and profit efficiency for the banks. Yet, the study highlighted the existence of significant gaps in efficiency across Jordanian Commercial Banks showing that efficiency gap, at cost and income level, had widened during the study period.


Keywords


Cost Efficiency, Standard Profit Efficiency, Alternative Profit Efficiency.

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