A Hybrid Multi-Criteria Decision-Making Model for Performance Assessment in the Banking Industry

Abstract

This work presents a novel hybrid multi-criteria decision-making (MCDM) framework designed to assess the financial and non-financial Environmental, Social, and Governance (ESG) performance of the banking sector. To demonstrate its applicability, a longitudinal case study was conducted on a major Turkish bank using annual data from 2012 to 2022. The proposed framework integrates two complementary methodologies: Maximum of Criterion (MAXC) and Range of Value (ROV). The MAXC method was utilized to objectively compute the weights of financial and non-financial performance indicators, while the ROV procedure enabled the ranking of annual performance across both dimensions. The evaluation followed a two-stage structure. In the first phase, MAXC revealed that the most influential financial indicators were return on average assets, return on average equity, and the ratio of non-performing loans to total loans. For the non-financial dimension, community engagement, governance quality, and human rights emerged as the most impactful criteria. In the second phase, the ROV method was employed to calculate composite performance scores and derive annual rankings. The results indicate that 2022, 2012, and 2014 marked the strongest years in terms of financial performance, while 2021, 2022, and 2020 demonstrated the highest ESG-related performance. Finally, a series of sensitivity analyses confirmed the robustness and reliability of the proposed hybrid model, thereby validating its suitability for comprehensive performance evaluation in the banking sector.