Non-parametric analysis of efficiency gains from bank mergers in India

This paper offers an insight into the effectiveness of economic policy reforms in the Indian Banking System by examining the efficiency benefits of mergers among Scheduled Commercial Banks in India over the post-reform period 1991-92 to 2004-05. It does this by using the methodology developed by Bogetoft and Wang (2005). We also provide a metric for judging the success or failure of a merger. Overall, we find that bank mergers in the post reform period possessed considerable potential efficiency gains stemming from harmony gains. Post merger efficiency analysis of the merged bank with a control group of non-merging banks reveals an initial merger related efficiency advantage for the former that, while persistent, did not show a sustained increase thus failing to provide the merging banks with a competitive advantage vis-à-vis their non-merging counterparts. To-date there have been relatively few studies focusing on the mergers and acquisitions scenario in India and even fewer focusing on the efficiency benefits of mergers involving SCBs. This paper addresses this current weakness in the literature

How a regulatory capital requirement affects banks' productivity: an application to emerging economies

© 2015, Springer Science+Business Media New York. This paper presents a novel approach to measure efficiency and productivity decomposition in the banking systems of emerging economies with a special focus on the role of equity capital. We model the requirement to hold levels of a fixed input, i.e. equity, above the long run equilibrium level or, alternatively, to achieve a target equity-asset ratio. To capture the effect of this under-leveraging, we allow the banking system to operate in an uneconomic region of the technology. Productivity decomposition is developed to include exogenous factors such as policy constraints. We use a panel data set of banks in emerging economies during the financial upheaval period of 2005–2008 to analyse these ideas. Results indicate the importance of the capital constraint in the decomposition of productivity

Comparative analysis on industry operating performance efficiency

This paper presents a comparative study on the operating efficiency of companies from various industries.A total of 189 top performance companies from seven industries listed in Kuala Lumpur Composite Index were used in the efficiency strength and return to scale analyses.The input oriented Data Envelopment Analysis models were employed in the analyses.Data were obtained from the annual financial statement for the year 2012.On average, the operational efficiency level of the companies were only three quarters and over half of the total number of companies were operating below average efficiency level.Only a small number of companies will remain efficient in their operations while the rest will have difficulty in making themselves efficient in short term. About half of the total number of companies was operating with minimum cost to achieve maximum output

ALBANIAN BANKING EFFICIENCY ANALYSIS: A PRODUCTION DEA APPROACH -COMPARISION OF CRS AND VRS MODEL

Abstract For performance evaluation purposes of economic entity one should consider different aspects of its activity. In case of banks this objective is quite difficult since they offer a wide range of services and the activities performed are such complex. Researchers all over the world have adopted different approaches and techniques for bank evaluation from different point of view: from shareholder`s or regulators. From the literature review we cannot observe the most preferred approach implemented for this purpose. Last years the economic models , parametric and non-parametric approaches have gained much interest in the field. In this study we propose a non-parametric approach for bank evaluation known as Data Envelopment Analysis (DEA). Shortly, here in it is presented the DEA background and its development from the original work of Charnes

Managing Merger Risk During the Post-Selection Phase

Mergers and acquisitions (M&A) are an important part of many companies’ strategic plans, yet they often fail to meet expectations. Part of this failure may be due to a lack of understanding of the risks present during the important period after the initial agreement to merge has been struck and the failure to apply a practical framework for managing these risks. The literature outlines many of the risks managers face and explains risk resolution techniques that can be used to mitigate these risks. Risk management techniques or frameworks have been developed for use in projects involving mergers and acquisitions (M&A), construction, strategic alliances, software requirements development, distributed software projects, and post-merger implementation of information systems. However, to our knowledge, no integrated framework has been developed to manage risks during the post-selection phase of mergers and acquisitions. In this dissertation we identify risks present and the risk resolutions available at this stage of the M&A process via a review of the literature and interviews with experienced managers of mergers and acquisitions. We then develop a practical framework for managing post-selection phase risks in M&A. We analyzed published case studies to evaluate the framework and confirm issues raised in the literature review. Hence, this research contributes to the M&A and risk management literature by identifying and classifying the risks in the post-selection phase of the M&A process, identifying and developing a classification of risk resolution actions linked to those risks, and providing a practical framework that can be used to more comprehensively identify risks and potential risk management strategies

Operational efficiency performance modelling of Malaysia manufacturing industry

This paper presents an alternative measurement performance system for public listed manufacturing based industry in Malaysia. An operational efficiency performance model for the production of each company was developed using the non-parametric approach, specifically the data envelopment analysis. The performance has been measured through the use of output-oriented based on CCR and BCC models.Data from 80 consumer and industrial product companies were used. The data consists of six inputs and two outputs obtained from financial statement for the year 2010.Experimental result was able to identify efficient and inefficient companies where half of the companies were considered almost efficient under the BCC model. However, only one third of the companies were near efficient when out orientation is performed under the CCR model

Number of ATMs, IT investments, bank profitability and efficiency in Greece

This paper investigates the effect of automated teller machines (ATMs), information technology (IT) investments and other determinants on the efficiency and profitability of Greek commercial banks. Following the two–step procedure: 1) efficiency is derived via the non–parametric data envelopment analysis (DEA) technique under the variable returns to scale (VRS) assumption; 2) efficiency scores are linked to a series of determinants of bank efficiency using a Tobit regression model. We find that profitability (ROAA and ROAE), ATMs and capitalisation show a negative impact on the efficiency of Greek banks. We also report that banks' size, capitalisation, IT investments and ATMs do not have any effect on the ROAA or the ROAE but they have a positive effect on the fees and commissions. However, we find that ATMs have a negative effect on the net interest income

The Synthetic Efficiency Measures of the Chinese Commercial Bank System with Bad Loans and Reserve Using Two-Stage DEA Model

Recently, the liquidity risk that exit in the b anks has constantly exposed. There was a panic when people heard the massage of money shortage and default. The bank management need to strengthen the safely and liquidity of bank as the same time to pursuit of profit maximization. According to above discover, in this article, efforts are made to analyze the synthetic efficiency of commercial banks combining the safety, liquidity, profitability of commercial banks. In this study, we utilize extend the two-stage centralized and non-cooperative DEA approach to disaggregate, evaluate and test the 16 major Chinese commercial banks in 2012 with the consideration of undesirable/bad output and reserve. The main findings of this study are as follows: i) The non-cooperative model may overestimate the efficiency of ignore the relationship between the traditional stage and financial innovation stage or disagree with the real bank operation. ii) Bad loans has significant negative effect on efficiency indicating that the large and more bad loans lead bank to lower efficiency. iii) The state-owned bank achieved relative lower efficient, it implies that the state-owned commercial banks are necessary to gradually complete their joint-equity reform. Key words: Two-stage DEA model; Game theory; Tobit model; Reserve; Bad loans; Synthetic efficienc