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How to better identify the true managerial performance: State of the art using DEA

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  • Avkiran, Necmi K.
  • Rowlands, Terry
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    Abstract

    Our motivation is to detail a potential improvement on the three-stage analysis published by Fried et al. [Accounting for environmental effects and statistical noise in data envelopment analysis. Journal of Productivity Analysis 2002;17:157-74] that can distinguish true performers from those that may be advantaged by favourable environments or measurement errors. The method starts with data envelopment analysis (DEA), and continues with stochastic frontier analysis to explain the variation in organisational performance in terms of the operating environment, statistical noise and managerial efficiency. It concludes with DEA again using adjusted data to reveal a measure of performance based on management efficiency only. Our proposed contributions include (i) a comprehensive approach where total input and output slacks are identified simultaneously for non-radial inefficiencies before levelling the playing field, (ii) identifying percent adjustments attributable to the environment and statistical noise, and (iii) using a fully units-invariant DEA model.

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    Bibliographic Info

    Article provided by Elsevier in its journal Omega.

    Volume (Year): 36 (2008)
    Issue (Month): 2 (April)
    Pages: 317-324

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    Handle: RePEc:eee:jomega:v:36:y:2008:i:2:p:317-324

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    Related research

    Keywords: Management DEA LP Efficiency;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Jose Pastor, 2002. "Credit risk and efficiency in the European banking system: A three-stage analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 895-911.
    2. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    3. Tone, Kaoru, 2001. "A slacks-based measure of efficiency in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 130(3), pages 498-509, May.
    4. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    5. Rajiv D. Banker & Richard C. Morey, 1986. "The Use of Categorical Variables in Data Envelopment Analysis," Management Science, INFORMS, vol. 32(12), pages 1613-1627, December.
    6. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    7. Fried, Harold O. & Knox Lovell, C. A. & Eeckaut, Philippe Vanden, 1993. "Evaluating the performance of US credit unions," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 251-265, April.
    8. Muniz, M. A., 2002. "Separating managerial inefficiency and external conditions in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 143(3), pages 625-643, December.
    9. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    10. H. Fried & C. Lovell & S. Schmidt & S. Yaisawarng, 2002. "Accounting for Environmental Effects and Statistical Noise in Data Envelopment Analysis," Journal of Productivity Analysis, Springer, vol. 17(1), pages 157-174, January.
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    Citations

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    Cited by:
    1. Maximilian J. B. Hall & Karligash A. Kenjegalieva & Richard Simper, 2008. "Environmental Factors Affecting Hong Kong Banking: A Post-Asian Financial Crisis Efficiency Analysis," Working Papers 122008, Hong Kong Institute for Monetary Research.
    2. repec:ise:isegwp:wp252008 is not listed on IDEAS
    3. Pestana Barros, Carlos & Sequeira Antunes, Olinda, 2011. "Performance assessment of Portuguese wind farms: Ownership and managerial efficiency," Energy Policy, Elsevier, vol. 39(6), pages 3055-3063, June.
    4. Joseph Paradi & Sandra Vela & Haiyan Zhu, 2010. "Adjusting for cultural differences, a new DEA model applied to a merged bank," Journal of Productivity Analysis, Springer, vol. 33(2), pages 109-123, April.
    5. Avkiran, Necmi K., 2009. "Opening the black box of efficiency analysis: An illustration with UAE banks," Omega, Elsevier, vol. 37(4), pages 930-941, August.
    6. Avkiran, Necmi K., 2009. "Removing the impact of environment with units-invariant efficient frontier analysis: An illustrative case study with intertemporal panel data," Omega, Elsevier, vol. 37(3), pages 535-544, June.
    7. Thoraneenitiyan, Nakhun & Avkiran, Necmi K., 2009. "Measuring the impact of restructuring and country-specific factors on the efficiency of post-crisis East Asian banking systems: Integrating DEA with SFA," Socio-Economic Planning Sciences, Elsevier, vol. 43(4), pages 240-252, December.
    8. Dong, Feng & Li, Xiaohui & Long, Ruyin & Liu, Xiaoyan, 2013. "Regional carbon emission performance in China according to a stochastic frontier model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 28(C), pages 525-530.
    9. Avkiran, Necmi K. & Thoraneenitiyan, Nakhun, 2010. "Purging data before productivity analysis," Journal of Business Research, Elsevier, vol. 63(3), pages 294-302, March.
    10. da Cruz, Nuno Ferreira & Marques, Rui Cunha, 2014. "Revisiting the determinants of local government performance," Omega, Elsevier, vol. 44(C), pages 91-103.
    11. Avkiran, Necmi K., 2011. "Association of DEA super-efficiency estimates with financial ratios: Investigating the case for Chinese banks," Omega, Elsevier, vol. 39(3), pages 323-334, June.
    12. Samoilenko, Sergey & Osei-Bryson, Kweku-Muata, 2013. "Using Data Envelopment Analysis (DEA) for monitoring efficiency-based performance of productivity-driven organizations: Design and implementation of a decision support system," Omega, Elsevier, vol. 41(1), pages 131-142.
    13. Siriopoulos, Costas & Tziogkidis, Panagiotis, 2010. "How do Greek banking institutions react after significant events?--A DEA approach," Omega, Elsevier, vol. 38(5), pages 294-308, October.
    14. Asmild, Mette & Pastor, Jesús T., 2010. "Slack free MEA and RDM with comprehensive efficiency measures," Omega, Elsevier, vol. 38(6), pages 475-483, December.
    15. Chang, Dong-Shang & Liu, Wenrong & Yeh, Li-Ting, 2013. "Incorporating the learning effect into data envelopment analysis to measure MSW recycling performance," European Journal of Operational Research, Elsevier, vol. 229(2), pages 496-504.
    16. Angela Stefania Bergantino & Enrico Musso, 2011. "The role of external factors versus managerial ability in determining seaports’ relative efficiency: An input-by-input analysis through a multi-step approach on a panel of Southern European ports," Maritime Economics and Logistics, Palgrave Macmillan, vol. 13(2), pages 121-141, June.

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