Managerial efficiency in Taiwan bank branches: A network DEA

Chyan Yang and Hsian-Ming Liu

Economic Modelling, 2012, vol. 29, issue 2, 450-461

Abstract: Taiwan's banking industry remains highly fragmented and competitive after a series of financial liberalization and restructuring. With the enforcement of these fiscal policies, domestic banking institutions face a more dynamic, increasingly intense and highly competitive environment even as the banking industry's overall efficiency has gradually been enhanced. This structural change has further forced individual banking institutions, especially state-owned banks, to inspect the performance of their branches and identify improvement directions so as to gain further competitive advantages. To conduct a valid, fair and reliable evaluation on Taiwan's bank branches, we integrate a two-stage series performance model and fuzzy multiobjective model. A new scheme that considers the complementation of production and intermediation activities within a branch and overcomes the shortage of the traditional network DEA methodology about DMUs cannot be assessed on a common base. The results indicate that the overall performances of mixed ownership bank branches are superior to those of state-owned bank branches, representing that the advantages of banking privatization have some remedial effects for improving the managerial inefficiency of state-owned banks. In addition, the sensitivity analysis and decision-making matrix herein help bank management to identify branches' efficiency, weakness, and directions for improvement.

Keywords: Banking; Efficiency; Network DEA; Fuzzy approach; Common multipliers (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (45)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:2:p:450-461

DOI: 10.1016/j.econmod.2011.12.004

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