Efficiency and productivity growth in Turkish commercial banking sector: a non-parametric approach

The financial liberalisation policies adopted in 1980 brought radical changes to the heavily regulated commercial banking sector in Turkey. The sector attracted many domestic and foreign banks, which created vigorous competition. As a result, increased competition in the market raised important questions on bank performance and efficiency. In this context, we aim to analyse the technical efficiency and productivity change over the period 19992 [sic]-1996. Utilising non-parametric methodologies, Data Envelopment Analysis (DEA) and DEA based Malmquist indices, we estimate the individual bank efficiencies and productivity changes which took place within this period. Further, we decompose the productivity index into frontier shifts (technical change) and catching up (technical efficiency) components.