Productivity Analysis for Banks’ Merger and Acquisition Using Two-Stage DEA: Evidence from China

Li Jia (), Wang Ping (), Tao Xiangyang () and Wen Yao ()
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Li Jia: School of Business, Central South University, Changsha410083, China
Wang Ping: School of Business, Central South University, Changsha410083, China
Tao Xiangyang: School of Business, Central South University, Changsha410083, China
Wen Yao: EMLYON Business School, 23 avenue Guy de Collongue, Ecully Cedex69134, France

Journal of Systems Science and Information, 2021, vol. 9, issue 6, 627-659

Abstract: Mergers and acquisitions (M&A) are important parts of banking reform, which can increase the synergies and reduce the costs of the banks. To analyze the effect and importance of the M&A in the reform period, we measure the productivity change of China’s banks who completed M&A during 2004– 2018, by using a two-stage data envelopment analysis (DEA) method. First, we incorporate the process of deposits producing and the process of profit earning as a two-stage structure of bank’s system. Then, we construct a slacks-based measure (SBM) model considering the weak disposability of undesirable outputs to measure the productivity of 14 M&A banks in China. Particularly, we adopt the global Malmquist index (GMI) to evaluate the productivity change of the banks, and analyze the efficiency change (EC) and technical change (TC) for the whole system and individual stages. Additionally, to facilitate making M&A plans, we classify the M&A banks to obtain the process they need to improve and the trend they could adopted: (i) We classify them into four categories by the productivity of two individual stages; (ii) We also classify them into four categories by EC and TC. Finally, the policy recommendations for M&A banks are given.

Keywords: data envelopment analysis; merger and acquisition; slack-based measure; undesirable outputs; China’s banking (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:9:y:2021:i:6:p:627-659:n:4

DOI: 10.21078/JSSI-2021-627-33

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