Efficiency, size, benchmarks and targets for bank branches: An application of data envelopment analysis

Efficiency, size, benchmarks and targets for bank branches: An application of data envelopment analysis

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Article ID: iaor20003538
Country: United Kingdom
Volume: 50
Issue: 9
Start Page Number: 903
End Page Number: 915
Publication Date: Sep 1999
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: statistics: data envelopment analysis, measurement
Abstract:

This paper describes an application of data envelopment analysis (DEA) to the performance assessment of Portuguese bank branches. The analysis shows how DEA can complement the profitability measure currently used at the bank. The use of an efficiency–profitability matrix enabled the characterisation of the branches' performance profile. Consistent with the bank's development objectives, the analysis focused on the relation between branch size and performance. Two alternative target setting strategies were explored. One eliminates pure technical inefficiencies by focusing on the selection of appropriate benchmarks. The other attains the branches' most productive scale size through the elimination of scale inefficiencies, with minimal changes to branches' scale size.

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