Benchmarking financial performance of Saudi banks using regression

Assessing the health of an economy can be accomplished by studying the financial performance of its banks. The hypotheses tested imply that there are significant differences amongst Saudi banks. The financial performance of banks in Saudi Arabia is studied on the basis of financial variables and ratios through the help of Spearmans’ rank correlation method. Although, benchmarking performance of banks is done using advanced linear programming models, this study attempts to develop an efficiency frontier on the basis of simple linear regression. Albeit certain restrictive assumptions, this study identifies Al Rajhi bank to be the best bank to which other banks could look up to and justifies this model on the basis of parsimony.