Estimation of potential gains from mergers in multiple periods: a comparison of stochastic frontier analysis and Data Envelopment Analysis

Estimation of potential gains from mergers in multiple periods: a comparison of stochastic frontier analysis and Data Envelopment Analysis

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Article ID: iaor20116890
Volume: 186
Issue: 1
Start Page Number: 357
End Page Number: 381
Publication Date: Jun 2011
Journal: Annals of Operations Research
Authors: , ,
Keywords: statistics: data envelopment analysis
Abstract:

A new dynamic Data Envelopment Analysis (DEA) approach is created to provide valuable managerial insights when assessing the merger performance. This new approach allows us to dynamically evaluate the pre‐merger firms and the post‐merger firm in a multi‐period situation. A case study of bank branch merger is conducted to illustrate and validate the proposed approach. Both stochastic frontier analysis and data envelopment analysis are used and compared leading to highly correlated results. The computation show that merger results in an overall efficiency achievement in a banking industry.

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