Efficiency of Banks in Croatia: A DEA Approach

Abstract

An understanding of a bank's relative performance compared to the market over a period of time is important for analysts, practitioners and policymakers alike. In this paper we analyze bank efficiency in Croatia between 1995 and 2000 by using the Data Envelopment Analysis (DEA). We find that foreign-owned banks are on average most efficient; that new banks are more efficient than old; and that smaller banks are globally efficient, but large banks are efficient when we allow for variable- returns- to- scale. We also find strong equalization in terms of average efficiency in the Croatian banking market, both between peer groups and within peer groups of banks.