Efficiency analysis of UAE banks using data envelopment analysis

Abstract

Purpose

– The current study aims to explore and measure the profitability, marketability, and social disclosure efficiency of UAE banks using a nonparametric frontier method – data envelopment analysis (DEA).

Design/methodology/approach

– In order to estimate the relative efficiency of the Emirati banks based on three different dimensions: profitability, marketability and social disclosure, a sample of 20 listed Emirati banks in 2009 is first selected. Second, a disclosure index to measure the extent of their social disclosure is developed and utilized. Third, the input‐oriented version of DEA model is deployed to estimate their technical and scale efficiency.

Findings

– Based on nonparametric Wilcoxon signed rank test, paired‐difference t test and sign test, this study reports significant evidence that the UAE banks are performing much better in profitability and social disclosure activities than marketability activities. The results also provide additional evidence regarding the positive relation observed between the performance of social disclosure and profitability performance.

Research limitations/implications

– The sample is small, although it includes all relevant Emirati banks. Moreover, follow‐up research using panel data derived from the UAE banking sector are required to test and generalize the current results.

Originality/value

– The paper is original in its approach by introducing social disclosure as a new empirical dimension to the literatures of banking efficiency analysis using DEA.