Jesus T. Pastor

An Efficiency Comparison of European Banking Systems Operating under Different Environmental Conditions

The paper investigates the operating efficiency differences of a sample of commercial banks across 10 European countries. First, the paper analyzes the technical efficiency of each country sample following the “basic” Data Envelopment Analysis (DEA) model incorporating only banking variables. Then, a “complete” DEA model is introduced, incorporating environmental factors together with the banking variables of the basic model. The comparison between the two models shows that country-specific environmental conditions exercise a strong influence over the behavior of each countrys banking industry.

AN ENHANCED DEA RUSSELL GRAPH EFFICIENCY MEASURE

Abstract The measurement of productive efficiency is an issue of great interest. Since Farrell (Farrell, M.J., 1957. Journal of Royal Statistical Society, Series A 120, 253) implemented the first measure of technical efficiency, many researchers have developed new measures or have extended the already existing ones. The beginning of Data Envelopment Analysis (DEA) meant a new way of empirically measuring productive efficiency. Under some specific technologies, Farrells measure was implemented giving rise to the first DEA models, CCR (Charnes, A., Cooper, W.W., Rhodes, E., 1978. European Journal of Operational Research 2, 429) and BCC (Banker, R.D., Charnes, A., Cooper, W.W., 1984. Management Science, 1078). The fact that these measures only account for radial inefficiency has motivated the development of the so-called Global Efficiency Measures (GEMs) (Cooper, W.W., Pastor, J.T., 1995. Working Paper, Departamento de Estadistica e Investigacion Operativa, Universidad de Alicante, Alicante, Spain). In this paper we propose a new GEM inspired by the Russell Graph Measure of Technical Efficiency which avoids the computational and interpretative difficulties with this latter measure. Additionally, the new measure satisfies some other desirable properties.

Evaluating Water Supply Services in Japan with RAM: a Range-adjusted Measure of Inefficiency

Abstract A range-adjusted measure (RAM) of efficiency, as recently developed in data envelopment analysis (DEA), is used to evaluate the performance of entities that supply water services in Japan. Its robustness properties are tested and pointed up for uses in improved accountability, and are further pointed up in terms of the potential for help in conducting performance and efficiency audits. The results from DEA are also joined with the Mann–Whitney rank order statistic to show how the two techniques may be jointly used in addressing issues of general policy. The Kanto Region and Kanagawa Prefecture in Japan are used for an illustration.

European Bank Performance Beyond Country Borders: What Really Matters?

The paper analyzes bank performance in the context of the integrated European Union market and its member countries. First, the paper investigates the technical efficiency of banks in each country sample using a Data Envelopment Analysis (DEA) model incorporating only banking variables. Then, a second DEA model is defined incorporating environmental factors together with banking variables in order to standardize the country-specific environmental conditions. Based on these models, the paper systematically analyzes the efficiency position for each of the European banking industry if average banks decide to operate in any other country. The results indicate that adverse (advantageous) environmental conditions are a positive (negative) factor for the home banking industry and being technically efficient appears to be a significant deterrence to foreign competition.

A statistical test for detecting influential observations in DEA

This paper deals with the problem of detecting influential observations in deterministic nonparametric DEA models. The technique we present is intended to classify for a further analysis those sample observations considerably affecting the measured efficiency for the remaining units. Then, the analyst will have to check whether these observations are contaminated by data errors or not. This approach also allows to determine when efficiency changes due to the presence of a given unit in the sample are statistically significant. Thus, ours is a statistical alternative to approach the problem of detecting influential observations in deterministic nonparametric DEA models.

Variables With Negative Values In Dea

In this chapter we present an overview of the different existing approaches dealing with the treatment of negative data in DEA. We discuss both the classical approaches and the most recent contributions to this problem. The focus is mainly on issues such as translation invariance and units invariance of the variables, classification invariance of the units, as well as efficiency measurement and target setting

On the inconsistency of the Malmquist–Luenberger index

Apart from the well-known weaknesses of the standard Malmquist productivity index related to infeasibility and not accounting for slacks, already addressed in the literature, we identify a new and significant drawback of the Malmquist–Luenberger index decomposition that questions its validity as an empirical tool for environmental productivity measurement associated with the production of bad outputs. In particular, we show that the usual interpretation of the technical change component in terms of production frontier shifts can be inconsistent with its numerical value, thereby resulting in an erroneous interpretation of this component that passes on to the index itself. We illustrate this issue with a simple numerical example. Finally, we propose a solution for this inconsistency issue based on incorporating a new postulate for the technology related to the production of bad outputs.

The Ex-Post Evaluation of the Minimum Local Reliability Level: An Enhanced Probabilistic Location Set Covering Model

In order to evaluate the behavior of three probabilistic location set covering models we propose a new method that allows the ex-post measurement of the so called “minimum local reliability level”, both under the independence and under the dependence assumption. We show experimentally, by means of a set of test problems, that the proposed loss-system version of Ball and Lins model (1993) does almost always achieve the required reliability level. Moreover, if we compare this new version with the other two already known probabilistic models and consider as a second additional criteria the least number of required vehicles, we show that the new version has a better behavior both under the independence and the dependence assumption. In this paper we further propose a new model with the aim of reducing the number of required vehicles while satisfying the fixed reliability level. Our new model is formulated like Ball and Lins model incorporating the servers workload estimate of the Binomial PLSCP of ReVelle and Hogan (1988). Finally, we check the precision of our ex-post evaluation method over the four considered models through a simulation study.

Cross-Border Performance in European Banking

Recent cross-country comparisons of bank efficiency have been based on pooled estimates of banks across countries and have typically assumed a common frontier and that differences in performance among banks are primarily due to disparities in certain country-specific aspects of banking technology. This paper argues that such comparisons of performance must take into account cross-country differences in economic conditions, demographics, and regulatory structures (environmental factors). Using a sample of banks from ten leading European countries, this paper provides detailed evaluations of the efficiency of banks in each country that operate both within and outside their own environments. The results indicate that adverse (advantageous) environmental conditions are a positive (negative) factor for the home banking industry and that technical efficiency is a significant deterrence to foreign competition.

Decomposing profit inefficiency in DEA through the weighted additive model

An issue that has received little attention in the Data Envelopment Analysis literature is the decomposition of profit inefficiency by means of measures that account all sources of technical inefficiency. In this paper we introduce a new way to measure and decompose profit inefficiency through weighted additive models. All our results are derived from a new Fenchel-Mahler inequality using duality theory.