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Purging data before productivity analysis

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  • Avkiran, Necmi K.
  • Thoraneenitiyan, Nakhun

Abstract

Studies of productivity often ignore measurement error and fail to distinguish between exogenous and endogenous factors in adjusting for the environment. This failure may misguide managerial decisions on benchmarking, ranking, and remuneration. For example, common relative efficiency techniques such as data envelopment analysis (DEA) assume away the measurement error. This article combines DEA with stochastic frontier analysis in a synergistic multiple-stage analysis to purge the estimate of managerial performance of measurement error and exogenous factors. Removing the impact of measurement error indicates the largest rise in productivity. Removing the impact of exogenous factors raises discriminatory power. The method offers a number of innovations over other studies in the literature. The article is also the first to investigate the profit efficiency of the commercial banks in the United Arab Emirates.

Suggested Citation

  • Avkiran, Necmi K. & Thoraneenitiyan, Nakhun, 2010. "Purging data before productivity analysis," Journal of Business Research, Elsevier, vol. 63(3), pages 294-302, March.
    • Handle: RePEc:eee:jbrese:v:63:y:2010:i:3:p:294-302
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    6. Boussemart, Jean-Philippe & Leleu, Hervé & Shen, Zhiyang & Vardanyan, Michael & Zhu, Ning, 2019. "Decomposing banking performance into economic and credit risk efficiencies," European Journal of Operational Research, Elsevier, vol. 277(2), pages 719-726.
    7. Hall, Maximilian J.B. & Kenjegalieva, Karligash A. & Simper, Richard, 2012. "Environmental factors affecting Hong Kong banking: A post-Asian financial crisis efficiency analysis," Global Finance Journal, Elsevier, vol. 23(3), pages 184-201.
    8. Almanza, Camilo & Mora Rodríguez, Jhon James, 2018. "Profit efficiency of banks in Colombia with undesirable output: A directional distance function approach," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-18.
    9. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.
    10. Sadia Farooq, 2018. "Performance Evaluation of Microfinance Providers Using Data Envelopment Analysis: The Profitability Perspective," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 5(1), pages 111-123, March.
    11. Wu, Po-Chin & Liu, Shiao-Yen & Zhai, Rui-Xiang, 2018. "Nonlinear impacts of operating risk and demand management policy on banks’ performance: The role of leading indicator," Economic Analysis and Policy, Elsevier, vol. 59(C), pages 40-53.
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    17. Chan, Sok-Gee & Koh, Eric H.Y. & Zainir, Fauzi & Yong, Chen-Chen, 2015. "Market structure, institutional framework and bank efficiency in ASEAN 5," Journal of Economics and Business, Elsevier, vol. 82(C), pages 84-112.

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