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A multidimensional approach to measuring bank branch efficiency

Anna Grazia Quaranta, Anna Raffoni and Franco Visani

European Journal of Operational Research, 2018, vol. 266, issue 2, 746-760

Abstract: Bank branch efficiency measurements range from simple ratio and standard regression analyses to more complex frontier approaches, each with specific strengths and weaknesses. However, in isolation, the indexes that these approaches generate fail to capture the multidimensional nature of bank branch efficiency. This paper develops a three-step procedure that enables combining the strengths of the existing approaches. We begin by taking the widest number of efficiency indexes proposed in literature (step 1), reduce the redundant information through a collinearity analysis (step 2), and categorize bank branches into efficiency classes through a clustering procedure (step 3). We test our approach on 23 branches of an Italian regional bank.

Keywords: OR in banking; Bank efficiency; Data envelopment analysis; Multidimensional performance; Performance measurement systems (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:ejores:v:266:y:2018:i:2:p:746-760