NDLI: An enhanced DEA model for decomposition of technical efficiency in banking

Content Provider	Springer Nature Link
Author	Yang, Chih Ching
Copyright Year	2011
Abstract	Past studies about the application of data envelopment analysis (DEA) to banking performance often follow the concept of technical efficiency (TE) and/or the productivity defined by the TE. In this paper, we propose an enhanced DEA model, based on a modification of the directional distance function by simultaneously but disproportionately seeking the maximum expansion of each desirable output and contraction of each undesirable output for efficiency measurement, which allows us to decompose the TE into operating efficiency (OPE) and risk management efficiency (RME). The OPE characterizes the ability of a bank to expand the room for profits through its regular business activities, while the RME describes a bank’s ability in risk management activities for sustaining operations. To illustrate the usefulness of the proposed model, a case study of Taiwan’s domestic commercial banks is presented. The major findings are that operating inefficiency is the main source of technical inefficiency, although banks with a higher OPE generally also have a higher RME. Banks subordinate to financial holding companies are more efficient in both OPE and RME than stand-alone banks.
Starting Page	167
Ending Page	185
Page Count	19
File Format	PDF
ISSN	02545330
Journal	Annals of Operations Research
Volume Number	214
Issue Number	1
e-ISSN	15729338
Language	English
Publisher	Springer US
Publisher Date	2011-07-06
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Technical efficiency Efficiency decomposition Data envelopment analysis Banking Operations Research/Decision Theory Combinatorics Theory of Computation
Content Type	Text
Resource Type	Article
Subject	Management Science and Operations Research

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