Comparative Analysis of the Efficiency in the Commercial Banks of Iran: Using DEA and SFA Approaches

The main Purpose of this study is to investigate the comparative efficiency of commercial banks in Iran using stochastic frontier function as a parametric and data envelopment analysis as a non-parametric approaches. The data used cover the period 1996-2004. The findings of this paper show that there is a significant difference between non–parametric and parametric methods in measuring the efficiency in the commercial banks of Iran. The mean of cost efficiency, allocative efficiency, and technical efficiency are 65, 96, and 68 percent, respectively, using DEA approach. Moreover, a linear translog cost function is specified and estimated. The estimated Mean of efficiency is 34 percent.