Chance-Constrained Efficiency Analysis

Data envelopment analysis (DEA) is extended to the case of stochastic inputs and outputs through the use of chance-constrained programming. The chance-constrained envelope envelops a given set of observations "most of the time." We show that the chance-constrained enveloping process leads to the definition of a conventional (certainty-equivalent) efficiency ratio (a ratio between weighted outputs and weighted inputs). Furthermore, extending the concept of Pareto and Koopmans efficiency to the case of chance-constrained dominance (to be defined), we establish the identity of the following two chance-constrained efficiency concepts: (i) the chance constrained DEA efficiency measure of a particular output-input point is unity, and all chance-constraints are binding; (ii) the point is efficient in the sense Pareto and Koopmans. Finally we discuss the implications of our approach for econometric frontier analysis.IC2 Institut

Fundamental analysis of stocks by two-stage DEA

Fundamental analysis of stocks links financial data to firm value in two consecutive steps: a predictive information link tying current financial data to future earnings, and a valuation link tying future earnings to firm value. At each step, a large number of causal factors have to be factored into the evaluation. To effect these calculations, we propose a new two-stage multi-criteria procedure, drawing on the techniques of data envelopment analysis. At each stage, a piecewise linear efficiency frontier is fitted to the observed data. The procedure is illustrated by a numerical example, analyzing some 30 stocks in the Spanish manufacturing industry in the years 1991-1996. Copyright © 2004 John Wiley & Sons, Ltd.

Strong Legacies and Weak Markets: Bulgarian State-Owned Enterprises During Early Transition

We examine the factors affecting the performance of state-owned enterprises (SOEs) during early transition to a market economy. Data come from a longitudinal study of a representative sample of Bulgarian SOEs for the period from 1989 (the last year under communism) to 1993 (three years after major macroeconomic shifts). We investigate how changes in authority structure, work organization, technology, marketing strategy, and organizational boundaries during these years affected organizational performance in 1993. We also assess the degree of path dependence in performance and the role of competitive industry conditions. Numerous organizational changes made by SOEs during early transition had little effect on performance. Yet organizational performance from 1989 to 1993 was highly path-dependent, although this dependence was mediated by the competitive conditions: Stronger markets displayed less path dependence. Overall the results favor the interpretations derived from selected neo-institutional and ecological perspectives of organizational sociology over neoclassical economic interpretations