Measuring the Efficiency of Thai Commercial Banks during the COVID-19 Pandemic by Data Envelopment Analysis

Abstract

This study intends to measure the comparative efficiency of Thai Commercial Banks. The performance data has been collected over the past 2 years, between 2020 and 2021 during the COVID-19 pandemic and then compared to performance during the normal period of 2017-2018. Data Envelopment Analysis (DEA) using Variable Return to Scale (VRS) is applied to measure banking performance. Through Intermediation Approach, specific input variables are considered: employee expenses, directors’ remuneration expenses, premises and equipment expenses and deposits. The output variables, including loans to customers and investment, are also analyzed. the same time, through the Production Approach, these specific input variables are analyzed: employee expenses, directors’ remuneration expenses, premises and equipment expenses, fees and service expenses, taxes and duties and interest expenses. The output variables, including interest income, fee and service income, deposit, and loans to customers, are used to analyze the efficiency. The results of analysis with the Intermediation Approach indicate 5 of 13 Thai Commercial Banks were considered relatively inefficient including BAY, BBL, KBANK, SCB and SCBT. In addition, CIMB is 1 of 13 Thai Commercial Banks is considered as relatively inefficient under the Production Approach.