Fuzzy Analytic Network Process with Principal Component Analysis to Establish a Bank Performance Model under the Assumption of Country Risk

Alin Opreana (), Simona Vinerean, Diana Marieta Mihaiu, Liliana Barbu and Radu-Alexandru Șerban
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Alin Opreana: Department of Management, Marketing and Business Administration, Lucian Blaga University of Sibiu, 550024 Sibiu, Romania
Simona Vinerean: Department of Management, Marketing and Business Administration, Lucian Blaga University of Sibiu, 550024 Sibiu, Romania
Diana Marieta Mihaiu: Department of Finance and Accounting, Lucian Blaga University of Sibiu, 550024 Sibiu, Romania
Liliana Barbu: Department of Finance and Accounting, Lucian Blaga University of Sibiu, 550024 Sibiu, Romania
Radu-Alexandru Șerban: Department of Management, Marketing and Business Administration, Lucian Blaga University of Sibiu, 550024 Sibiu, Romania

Mathematics, 2023, vol. 11, issue 14, 1-38

Abstract: In recent years, bank-related decision analysis has reflected a relevant research area due to key factors that affect the operating environment of banks. This study’s aim is to develop a model based on the linkages between the performance of banks and their operating context, determined by country risk. For this aim, we propose a multi-analytic methodology using fuzzy analytic network process (fuzzy-ANP) with principal component analysis (PCA) that extends existing mathematical methodologies and decision-making approaches. This method was examined in two studies. The first study focused on determining a model for country risk assessment based on the data extracted from 172 countries. Considering the first study’s scores, the second study established a bank performance model under the assumption of country risk, based on data from 496 banks. Our findings show the importance of country risk as a relevant bank performance dimension for decision makers in establishing efficient strategies with a positive impact on long-term performance. The study offers various contributions. From a mathematic methodology perspective, this research advances an original approach that integrates fuzzy-ANP with PCA, providing a consistent and unbiased framework that overcomes human judgement. From a business and economic analysis perspective, this research establishes novelty based on the performance evaluation of banks considering the operating country’s risk.

Keywords: fuzzy-ANP; principal component analysis; bank performance; country risk (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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