Efficiency and Its Impact on the Performance of Iraqi Private Banks: Data Envelopment Analysis (DEA)

This research investigates the efficiency of Iraqi private commercial banks and its effect on banking performance over the period 2017-2019. Using Data Envelopment Analysis (DEA). The results indicate that banks with foreign ownership exhibit full technical efficiency under VRS, whereas most domestic private banks are inefficient and operate below their optimal scale. This is because a significant proportion of banks are relatively small and operate under increasing returns to scale, suggesting that expansion or consolidation through mergers could enhance efficiency and generate economies of scale. Furthermore, while technical efficiency shows a positive and statistically significant effect on profitability, neither technical nor scale efficiency demonstrates a significant impact on liquidity indicators. Overall, the findings highlight the importance of efficiency improvements particularly technical efficiency for enhancing the profitability and competitiveness of Iraqi private commercial banks.