Measuring the productivity of Serbian banks using Malmquist index

Abstract

This paper evaluates the scale of productivity change of the Bank of Serbia over the period 2007-2010. In this research the emphasis is put on measuring the productivity based on information from the financial statements using Data Envelopment Analysis (DEA) method and Malmquist index to estimate the individual bank efficiency and productivity changes within this period. The Malmquist productivity indices have been decomposed into technical changes of efficiency index and index of technology changes. DEA is an increasingly popular management tool. It is widely known what represents an input and what is output in banking operations, but for an adequate analysis of the efficiency or the productivity of banks it is essential to choose the right combination of inputs and outputs of the bank. In relevant academic literature various combinations of inputs and outputs could be seen for measuring the efficiency and productivity of banks. This paper shows the productivity decrease of the banking sector.