Data envelopment analysis and assurance region efficiency and profitability of Mexican banks: A total income model

Data envelopment analysis and assurance region efficiency and profitability of Mexican banks: A total income model

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Article ID: iaor19991268
Country: Netherlands
Volume: 98
Issue: 2
Start Page Number: 346
End Page Number: 363
Publication Date: Apr 1997
Journal: European Journal of Operational Research
Authors: , , ,
Keywords: financial, performance, statistics: data envelopment analysis
Abstract:

Data envelopment analysis (DEA) and linked-cone assurance region (LC-AR) models are used in this paper to investigate the efficiency and profitability potential of Mexican banks as they engage in activities that incur interest and non-interest expenses and produce income. DEA provides a measure of each bank's relation to the best-practice frontier for its competitors. This can provide a better quality-benchmark than using industry averages or a particular peer bank as the benchmark. The banks are classified into efficient and inefficient sets. Multiplier values for AR-inefficient banks with unique slacks indicate the potential for management to improve the bank's performance relative to its peers. LC-ARs that provide economically reasonable bounds for the multipliers lead to profitability potential, as distinct from efficiency, results.

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