Efficiency and CAMEL Composite in Iran Banking Industry

The soundness and validity of banks are one of the important subjects that neglecting them could have been leaded to adverse consequences for every countrychr('39')s economy. Therefore, investigation of relationship between efficiency and camel composite as a measurement of banking soundness and validity, within 16 Iranian bank data, between the years 1389 to 1396, has been studied. Efficiency has been estimated by the Translog cost function and stochastic frontier analysis, which its result shows an aggregate ascending trend. Camel composite which its calculation depends on arithmetic mean, is computed by exploratory factor analysis; exploring two factors, which is called financial ability and financial performance, is the result. For studding of variables relation, a panel data model and an auto regressive panel vector model have been used. The main result shows a positive financial ability and financial performance and significant relationship with efficiency; another result shows one side causality between financial performance and efficiency.