The Estimation of Efficiency and Its Effecting Factors in Iran's Banks

In this paper the efficiency of ten banks (Mellat, Tejarat, Refahe Kargaran, Saderat, Melli, Sepah, Tose Saderat, Maskan, Keshavarzi and Sanat va Madan) in Iran and the effective factors on their efficiency levels are estimated, using parametric statistical method, for 1994-2003 period. The estimation of efficiency is conducted by using Battese and Colli model (1992) - Model(1) - while for the estimation of the effective factors on efficiency, Battese and Colli model (1995)-Model (2)- is taken. Regarding the results obtained from the former model, the efficiency of the banks is estimated to be 87.76 percent. Also, for the case of the factors influential on the bank's efficiency, the results of the latter model showed that there is a positive relation between efficiency and sophistication of banks, the number of branches of the banks, and the time trend; meanwhile it has negative relation with the size of the banks.