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Measuring efficiency of domestic banks in Taiwan: application of data envelopment analysis and Malmquist index

Yi-Hsing Lin (), George J. Y. Hsu and Ching-Kai Hsiao

Applied Economics Letters, 2007, vol. 14, issue 11, 821-827

Abstract: The purpose of this article is to investigate relative efficiency of management and variation of managerial efficiency among 37 domestic banks in Taiwan. The relative efficiency of management is analysed through Data Envelopment Analysis (DEA) to estimate the competitiveness of each bank and managerial efficiency is to show the efficiency variation of each bank through Malmquist index. This article also links those two types of efficiency by constructing a matrix of relative efficiency and managerial efficiency defining of eight different categories of banks. The empirical results show that all 37 banks possess an average relative efficiency value of 0.591, with a SD of 0.228. And there are 6 banks with an efficiency value of 1. From the results estimated by Malmquist model, it indicates there are 20 banks with an efficiency variation greater than 1. This means that managerial efficiency of those 20 banks has been improving. However, there are 17 banks with an efficiency variation less than 1. This means that managerial efficiency of those 17 banks has been declining.

Date: 2007
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DOI: 10.1080/13504850600605960

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