Economics at your fingertips  

Performance analysis of non-banking finance companies using two-stage data envelopment analysis

Pankaj Dutta (), Aayush Jain () and Asish Gupta ()
Additional contact information
Pankaj Dutta: Indian Institute of Technology Bombay
Aayush Jain: Indian Institute of Technology Bombay
Asish Gupta: Indian Institute of Technology Bombay

Annals of Operations Research, 2020, vol. 295, issue 1, No 5, 116 pages

Abstract: Abstract This paper analyses the performance of non-banking finance companies (NBFC) in the Indian context using data envelopment analysis (DEA). The underlying objective of this study is to fill the void in the domain of NBFC, although a lot of research has been done on the banking industry in the context of the application of DEA, but none on NBFCs. The paper takes the panel data of the last 5 years (2014–2018) to calculate super-efficiencies in the first stage and then regresses the same on exogenous factors in stage-2. Descriptive statistics are used to estimate the efficiency by carrying out the calculations using both the traditional models (OTE, PTE and SE) and super-efficiency model. A comparison is made by categorizing NBFC’s based on the size of total assets and using non-parametric statistic tests to find whether the efficiency scores are significantly different across different categories. The second stage DEA analysis uses Tobit regression to find the exogenous factors which affect the model significantly. Based on traditional models, the total number of efficient DMUs are 8 out of 43 while there are 15 after considering the super-efficiency algorithm. Malmquist Indices are used to study the productivity indices of NBFCs over the last 5 years, and it gives us a maximum productivity growth of 8.53%. It was noticed that there is a significant difference in the mean efficiency values of different sized NBFC’s which can be explained by the lack of standardization in the NBFC domain and the few companies which are listed on the stock market. The managers should not consider ROE as a significant indicator of efficiency and should instead focus on aspects such as ROA and income diversity. Through the Malmquist analysis, the managers can break down the productivity change into technical and efficiency shifts for further investigation.

Keywords: Data envelopment analysis; NBFC; Super-efficiency; Tobit regression; Malmquist indices; India (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

DOI: 10.1007/s10479-020-03705-6

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2020-12-26
Handle: RePEc:spr:annopr:v:295:y:2020:i:1:d:10.1007_s10479-020-03705-6