Disentangling Within- and Between-Country Efficiency Differences of Bank Branches

In this paper we propose a framework to assess the efficiency of bank branch networks operating in different financial environments. The framework can be used to disentangle within- from between-country performance differences. The framework is constructive in that it identifies operational aspects responsible for superior performance and suggests guidelines for branch improvement. We report results from three bank branch networks in the U.K., Greece and Cyprus, and demonstrate how branch networks can benefit from such international comparisons.Bank Branch Efficiency, International Benchmarks, Data Envelopment Analysis.

Management Quality Measurement: Using Data Envelopment Analysis (DEA) Estimation Approach for Banks in Brazil

While the quality of a bank's management is generally acknowledged to be a key contributor to a financial institutional failure, it is usually not calculated for lack of an objective measure. This paper presents a new paradigm approach for quantifying a bank's managerial efficiency, using a data envelopment analysis (DEA) model that combines multiple inputs and outputs to compute a scalar measure of efficiency and management quality. The analysis of the largest 50 Brazilian banks over a twelve-year period from 1995 to 2006 shows significant differences in management quality scores between institutions. Hence, this new metric provides an important, but previously missing, modelling element for the early identification of troubled banks and can be used as a tool for off-site bank supervision in Brazil.Data Envelopment Analysis, DEA, Banks, Brazil

Data envelopment analysis in financial services: a citations network analysis of banks, insurance companies and money market funds

Development and application of the data envelopment analysis (DEA) method, have been the subject of numerous reviews. In this paper, we consider the papers that apply DEA methods specifically to financial services, or which use financial services data to experiment with a newly introduced DEA model. We examine 620 papers published in journals indexed in the Web of Science database, from 1985 to April 2016. We analyse the sample applying citations network analysis. This paper investigates the DEA method and its applications in financial services. We analyse the diffusion of DEA in three sub-samples: (1) banking groups, (2) money market funds, and (3) insurance groups by identifying the main paths, that is, the main flows of the ideas underlying each area of research. This allows us to highlight the main approaches, models and efficiency types used in each research areas. No unique methodological preference emerges within these areas. Innovations in the DEA methodologies (network models, slacks based models, directional distance models and Nash bargaining game) clearly dominate recent research. For each subsample, we describe the geographical distribution of these studies, and provide some basic statistics related to the most active journals and scholars

Improving Service Performance in Banking using Quality Adjusted Data Envelopment Analysis

The goal of this research is to describe the application of data envelopment analysis (DEA) to the performance evaluations of bank branches. Special attention is focused on how to incorporate the quality dimension into branch efficiency. DEA will apply to a set of micro-data from a Czech commercial bank branch network. In the banking sector, providing services quality is one of the key focuses. Therefore, the quality dimension should be incorporated into the DEA model. The goal of the quality adjusted DEA model is to identify best practice branches that work efficiently and at the same time provide services with high quality. This model avoids productivity-quality tradeoff, which is present by the standard DEA model. The quality of services is measured by customer service, mystery shopping and calls, client information index, retention, and client product penetration. Main determinants of efficiency and quality level are branch size and region via purchasing power.quality adjusted DEA, branch performance, scale efficiency, return to scale

Efficiency of Financial Institutions: International Survey and Directions for Future Research

This paper surveys 130 studies that apply frontier efficiency analysis to financial institutions in 21 countries. The primary goals are to summarize and critically review empirical estimates of financial institution efficiency and to attempt to arrive at a consensus view. We find that the various efficiency methods do not necessarily yield consistent results and suggest some ways that these methods might be improved to bring about findings that are more consistent, accurate, and useful. Secondary goals are to address the implications of efficiency results for financial institutions in the areas of government policy, research, and managerial performance. Areas needing additional research are also outlined.

Microfinance institutions and efficiency

Microfinance Institutions (MFIs) are special financial institutions. They have both a social nature and a for-profit nature. Their performance has been traditionally measured by means of financial ratios. The paper uses a Data Envelopment Analysis (DEA) approach to efficiency to show that ratio analysis does not capture DEA efficiency.Special care is taken in the specification of the DEA model. We take a methodological approach based on multivariate analysis. We rank DEA efficiencies under different models and specifications; e.g., particular sets of inputs and outputs. This serves to explore what is behind a DEA score. The results show that we can explain MFIs efficiency by means of four principal components of efficiency, and this way we are able to understand differences between DEA scores. It is shown that there are country effects on efficiency; and effects that depend on Non-governmental Organization (NGO)/non-NGO status of the MFI

Relative efficiency in the branch network of a Greek bank : a quantitative analysis

Measuring and evaluating the efficient use of resources of Bank branches plays a decisive role in a Bank’s strategic planning. Usually, efficiency is measured by using accounting ratios, such as labor productivity, capital productivity, return on assets etc. When these ratios are properly used, they provide significant information regarding the effective operation of the branch, and contribute in carrying out intrabank comparisons and comparisons over a period of time. However, by using such ratios, an important part of the branch operation remains uncovered: the measurement of the effective use of the resources. New mathematical programming models that are related with the degree at which each branch makes use of its resources, are applied to deal with the weaknesses of such ratios. This study discuss the limitations of using accounting ratio analysis for assessing performance and, presents and interprets the results from the application of mathematical programming models in a sample of branches of a Greek Bank.peer-reviewe

Measuring the effect of virtual mergers on banks’ efficiency levels:A non parametric analysis

This study illustrates how the recent developments in efficiency analysis and statistical inference can be applied when evaluating banks’ performance issues from a potential merger. By using a sample of 29 Greek commercial banks the paper provides a six step procedure in order to evaluate whether a potential bank merger can exhibit economies of scale and characterized as favorable.Data Envelopment Analysis; Bootstrap techniques; Virtual Mergers; Bank efficiency.

A bi-level multi-objective data envelopment analysis model for estimating profit and operational efficiency of bank branches

Data Envelopment Analysis (DEA) is a powerful method for analyzing the performance of decision making units (DMUs). Traditionally, DEA is applied for estimating the performance of a set of DMUs through measuring a single perspective of efficiency. However, in recent years, due to increasing competition in various industries, modern enterprises focus on enhancing their performance by measuring efficiencies in different aspects, separately or simultaneously. This paper proposes a bi-level multi-objective DEA (BLMO DEA) model which is able to assess the performance of DMUs in two different hierarchical dimensions, simultaneously. In the proposed model, we define two level efficiency scores for each DMU. The aim is to maximize these two efficiencies, simultaneously, for each DMU. Since the objective functions at both levels are fractional, a fuzzy fractional goal programming (FGP) methodology is used to solve the proposed BLMO DEA model. The capability of the proposed model is illustrated by a numerical example. Finally, to practically validate the proposed model, a real case study from 45 bank’s branches is applied. The results show that the proposed model can provide a more comprehensive measure for efficiency of each bank’s branch based on simultaneous measuring of two different efficiencies, profit and operational efficiencies, and by considering the level of their importance