Analysing banks' intermediation and operational performance using the Hicks–Moorsteen TFP index: the case of Iran

In

order

to

analyse

the

impact

of

policy

reforms

on

the

performance

of

the

banking

sector

in

Iran

we

present

a

decomposition

of

the

Hicks–Moorsteen

Total

Factor

Productivity

(TFP).

This

entails

a

comparison

of

both

the

intermediate

and

operating

performances

of

different

types

of

banks

in

the

pre-

and

post-reform

eras.

Our

results

show

that

under

the

intermediation

approach,

state-owned

banks

(public

banks)

were

considerably

more

efficient

than

private

banks

in

the

post-regulation

period.

In

contrast,

under

the

operating

approach,

private

banks

were

fully

technically

efficient

and

mix

efficient

in

both

pre

and

post-reform

eras.

This

paper

highlights

the

importance

of

analysing

performance

from

multiple

perspectives.

The

findings

reflect

public

banks’

mission

to

maximise

loans

to

target

groups

while

private

banks

are

motivated

more

by

financial

profit.