On FDH efficiency analysis: Some methodological issues and applications to retail banking, courts, and urban transit (original) (raw)
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The methodology of free disposal hull (FDH) measure of productive efficiency is defined and put in perspective visa `-vis other nonparametric techniques, in terms of the postulates on which they respectively rest. Computational issues are also considered, in relation to the linear programming techniques used in DEA. The first application bears on a comparison between a private and a public bank, in terms of the relative efficiency of their branches. Important characteristics of the data are revealed by FDH that are not by DEA, due to a better data fit. Next, efficiency estimates of judicial activities are used to evaluate what part of the existing backlog could be reduced by efficiency increases. Finally, with monthly data of an urban transit firm over 12 years, the FDH methodology is extended to a sequential treatment of time series, that supplements efficiency estimation with a measure of technical progress.
DEA TECHNIQUES FOR MEASURING EFFICIENCY OF INDIAN PUBLIC SECTOR BANKS
The main purpose of the study is, measuring the efficiency of Indian public sector banks. One may have a challenging task to evaluate the efficiency in the banking system, because every bank has its own policies with varying management philosophical attitudes. In the present scenario, measuring efficiency is necessary for commercial bank as well as for investors. Data Envelopment Analysis (DEA) is a linear programming-based technique for measuring relative efficiency assessment called DEA efficient, for a group of decision making units (DMUs) with multiple inputs and multiple outputs. As DEA is non-parametric method, it does not require any assumptions as in parametric approach. Using DEA technique, we calculate Global technical Efficiency, Local pure technical efficiency and scale efficiencies for 26 public sector banks operating on Indian soil.
Decomposition of efficiency using DEA window analysis
Benchmarking: An International Journal
Purpose The purpose of this paper is to examine empirically the efficiency types of Islamic and conventional banks. It seeks to show whether the efficiency level of conventional and Islamic banks significantly differs from each other. In addition, it investigates the influential factors on each type of efficiency. Design/methodology/approach The paper utilises the data envelopment analysis in its windows version to estimate the efficiency scores reflecting the time variance and compares between banking models. The paper uses pure technical efficiency (TE) and scale efficiency to achieve the objective of the study. In addition, the panel data technique is adopted to assess the determinants of the efficiency of the banks econometrically. Findings The findings of panel regression initially indicate that the pure TE is higher for conventional banks compared to Islamic banks. However, the Islamic banks are more scale efficient than their conventional counterpart. Macro and micro indicato...
Measuring bank efficiency: DEA application
Technological and Economic Development of Economy, 2014
The paper aims to improve the methodology of measuring efficiency of Latvian banks. Efficiency scores were calculated with application of non-parametric frontier technique Data Envelopment Analysis (DEA). Input-oriented DEA model under Variable Returns to Scale (VRS) assumption was used. Potential model variables were selected based on the intermediation and profitability approach. Fourteen alternative models with different inputs-outputs combinations were developed for the research purposes. To substantiate the variables selection for DEA model the received data was processed, using such methods, as correlation analysis, linear regression analysis, analysis of mean values, and two-samples Kolmogorov-Smirnov test. The research results assisted the authors in providing general recommendations about the variables selection for DEA application in the Latvian banking sector. The present research contributes to the existing analytical data on bank performance in Latvia. The empirical fin...
Efficiency Analysis of Banks using DEA: A Review
In this paper an attempt has been made to review research conducted on the efficiency measurement and performance of the Indian banking sector. Many research have been performed over the past decade in the area of measuring efficiency of firms,companies,banks,and other decision making units.Studies in the past used conventional ratios such as return on assets to evaluate the efficiency. Most of these studies which look at the efficiency concentrate on cost ,profit ,income or revenue efficiencies.Later research in the area used various measure of performance which include financial index,a non parametric approach- Data Envelopment Approach(DEA) and parametric approach –Stochastic Production Approach (SPA).
iaeme, 2013
The following research article discusses the technique to measure the technical efficiency of Decision Making Units(DMUs). Efficiency means to measure how well the DMUs are doing given the circumstance & inputs. Decision Making Units are similar enterprises ranging from publically held companies , Privately owned corporation, Banks, Non-profit organization, airports etc. There are many ways to calculate efficiency of DMUs. This research paper will focus on the Banking sector. Financial Ratios is one of leading methods to calculate efficiency of Banks. Liquidity, profitability, & leverage position of the enterprises are calculated to understand the ranking of various Banks. Data envelopment Analysis technique is the latest methodology to benchmark performance of Banks. Data envelopment Analysis is a non-parametric approach used through linear programming to decide efficiency of similar enterprises. The following research paper discusses the various studies conducted by authors using both financial ratios& DEA. The article also discusses research work carried out by authors on Data Envelopment Analysis, specifically.