Measuring bank performance using DEA and Monte Carlo simulation

Chien-Ta Bruce Ho and Desheng Dash Wu

International Journal of Management and Enterprise Development, 2008, vol. 5, issue 6, 634-655

Abstract: Rapid changes in the economic environment have raised the need to evaluate the performance or efficiency in banks, especially after the financial liberalisation in East Asia. Data Envelopment Analysis (DEA) is able to measure the efficiency of the banking industry. In this paper, we use DEA with Monte Carlo simulation to measure the efficiency of 49 banks in Taiwan. Missing data is carefully handled in our case by use of stepwise regression model. A technique to implement DEA Monte Carlo simulation analysis is presented based on Microsoft Excel spreadsheet. DEA Monte Carlo simulation indicates our DEA results exhibit a good robustness in terms of identification of efficient banks.

Keywords: DEA; data envelopment analysis; Monte Carlo simulation; missing value; banking efficiency; banks; bank performance; performance measurement; Taiwan; stepwise regression models. (search for similar items in EconPapers)
Date: 2008
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