IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v43y2022i7p2863-2874.html
   My bibliography  Save this article

Developing a network data envelopment analysis model to measure the efficiency of banking with the governance, innovation, and operations

Author

Listed:
  • Li‐Ting Yeh
  • Dong‐Shang Chang
  • Huei‐Min Li

Abstract

The bank's integrity culture is critical to the public's trust and long‐term development. However, previous literature on the efficiency evaluation of the banking merely focuses on operational efficiency. Therefore, this study measures the efficiency of Taiwanese banks through Network Data Envelopment Analysis (DEA) from the perspectives of banking integrity, environment, social, government (ESG), and Fintech. The results indicate the main reason for the difference in bank efficiency comes from the governance and innovation stage. Financial holding company's banks are more efficient than independent banks in each stage. The overall efficiency of state‐owned banks is lower than privately‐owned banks, mainly due to the lower efficiency score in the innovation stage.

Suggested Citation

  • Li‐Ting Yeh & Dong‐Shang Chang & Huei‐Min Li, 2022. "Developing a network data envelopment analysis model to measure the efficiency of banking with the governance, innovation, and operations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2863-2874, October.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:7:p:2863-2874
    DOI: 10.1002/mde.3568
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3568
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3568?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mirhedayatian, Seyed Mostafa & Azadi, Majid & Farzipoor Saen, Reza, 2014. "A novel network data envelopment analysis model for evaluating green supply chain management," International Journal of Production Economics, Elsevier, vol. 147(PB), pages 544-554.
    2. Matthews, Kent, 2013. "Risk management and managerial efficiency in Chinese banks: A network DEA framework," Omega, Elsevier, vol. 41(2), pages 207-215.
    3. Chen, Ci & Yan, Hong, 2011. "Network DEA model for supply chain performance evaluation," European Journal of Operational Research, Elsevier, vol. 213(1), pages 147-155, August.
    4. John H. Boyd & Chun Chang & Bruce Smith, 1998. "Moral hazard under commercial and universal banking," Proceedings, Federal Reserve Bank of Cleveland, issue Aug, pages 426-471.
    5. Laeven, Luc & Levine, Ross, 2009. "Bank governance, regulation and risk taking," Journal of Financial Economics, Elsevier, vol. 93(2), pages 259-275, August.
    6. Gholam R. Amin & Mustapha Ibn Boamah, 2021. "A two‐stage inverse data envelopment analysis approach for estimating potential merger gains in the US banking sector," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1454-1465, September.
    7. Chuang-Min Chao & Ming-Miin Yu & Hsiao-Ning Wu, 2015. "An Application of the Dynamic Network DEA Model: The Case of Banks in Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(S1), pages 133-151, January.
    8. Tone, Kaoru & Tsutsui, Miki, 2009. "Network DEA: A slacks-based measure approach," European Journal of Operational Research, Elsevier, vol. 197(1), pages 243-252, August.
    9. Meghana Ayyagari & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2010. "Formal versus Informal Finance: Evidence from China," The Review of Financial Studies, Society for Financial Studies, vol. 23(8), pages 3048-3097, August.
    10. Mu-Jen Chen & Yung-ho Chiu & Chyanlong Jan & Yu-Chuan Chen & Hsiang-Hsi Liu, 2015. "Efficiency and Risk in Commercial Banks - Hybrid DEA Estimation," Global Economic Review, Taylor & Francis Journals, vol. 44(3), pages 335-352, September.
    11. Jan Bena & Kai Li, 2014. "Corporate Innovations and Mergers and Acquisitions," Journal of Finance, American Finance Association, vol. 69(5), pages 1923-1960, October.
    12. Ming-Tse Wu, 2015. "The impact of transformation on economic efficiency – a case study of financial holding companies in Taiwan," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 20(3), pages 465-488, July.
    13. Kao, Chiang, 2016. "Efficiency decomposition and aggregation in network data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 255(3), pages 778-786.
    14. Podinovski, Victor V. & Kuosmanen, Timo, 2011. "Modelling weak disposability in data envelopment analysis under relaxed convexity assumptions," European Journal of Operational Research, Elsevier, vol. 211(3), pages 577-585, June.
    15. Seema Sharma & V. J. Thomas, 2008. "Inter-country R&D efficiency analysis: An application of data envelopment analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 76(3), pages 483-501, September.
    16. 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.
    17. Zhu, Joe, 2000. "Multi-factor performance measure model with an application to Fortune 500 companies," European Journal of Operational Research, Elsevier, vol. 123(1), pages 105-124, May.
    18. Chih-Ching Yang, 2014. "An enhanced DEA model for decomposition of technical efficiency in banking," Annals of Operations Research, Springer, vol. 214(1), pages 167-185, March.
    19. Sherman, H. David & Gold, Franklin, 1985. "Bank branch operating efficiency : Evaluation with Data Envelopment Analysis," Journal of Banking & Finance, Elsevier, vol. 9(2), pages 297-315, June.
    20. Dyckhoff, H. & Allen, K., 2001. "Measuring ecological efficiency with data envelopment analysis (DEA)," European Journal of Operational Research, Elsevier, vol. 132(2), pages 312-325, July.
    21. 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.
    22. Lin, Tzu-Yu & Chiu, Sheng-Hsiung, 2013. "Using independent component analysis and network DEA to improve bank performance evaluation," Economic Modelling, Elsevier, vol. 32(C), pages 608-616.
    23. Sanjay Ramchander & Robert G. Schwebach & KIM Staking, 2012. "The informational relevance of corporate social responsibility: evidence from DS400 index reconstitutions," Strategic Management Journal, Wiley Blackwell, vol. 33(3), pages 303-314, March.
    24. Saurabh Mishra & Sachin Modi, 2013. "Positive and Negative Corporate Social Responsibility, Financial Leverage, and Idiosyncratic Risk," Journal of Business Ethics, Springer, vol. 117(2), pages 431-448, October.
    25. Yu, Ming-Miin, 2010. "Assessment of airport performance using the SBM-NDEA model," Omega, Elsevier, vol. 38(6), pages 440-452, December.
    26. Zhou, P. & Ang, B.W. & Poh, K.L., 2008. "A survey of data envelopment analysis in energy and environmental studies," European Journal of Operational Research, Elsevier, vol. 189(1), pages 1-18, August.
    27. Hsiang‐Hsi Liu & Jih‐Jeng Huang & Yung‐Ho Chiu, 2020. "Integration of network data envelopment analysis and decision‐making trial and evaluation laboratory for the performance evaluation of the financial holding companies in Taiwan," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(1), pages 64-78, January.
    28. Yang, Chyan & Liu, Hsian-Ming, 2012. "Managerial efficiency in Taiwan bank branches: A network DEA," Economic Modelling, Elsevier, vol. 29(2), pages 450-461.
    29. Lawrence M. Seiford & Joe Zhu, 1999. "Profitability and Marketability of the Top 55 U.S. Commercial Banks," Management Science, INFORMS, vol. 45(9), pages 1270-1288, September.
    30. O’Connor, Matthew & Rafferty, Matthew, 2012. "Corporate Governance and Innovation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(2), pages 397-413, April.
    31. Kiril Tochkov & Nikolay Nenovsky, 2011. "Institutional Reforms, EU Accession, and Bank Efficiency in Transition Economies: Evidence from Bulgaria," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 113-129, January.
    32. Ying Li & Yung‐ho Chiu & Hongyi Cen & Tai‐Yu Lin, 2019. "The operating efficiency of financial holding and nonfinancial holding banks—Epsilou‐based measure metafrontier data envelopment analysis model," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(5), pages 488-499, July.
    33. Sarkis, Joseph & Cordeiro, James J., 2001. "An empirical evaluation of environmental efficiencies and firm performance: Pollution prevention versus end-of-pipe practice," European Journal of Operational Research, Elsevier, vol. 135(1), pages 102-113, November.
    34. Paul C. Godfrey & Craig B. Merrill & Jared M. Hansen, 2009. "The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis," Strategic Management Journal, Wiley Blackwell, vol. 30(4), pages 425-445, April.
    35. Chortareas, Georgios E. & Girardone, Claudia & Ventouri, Alexia, 2012. "Bank supervision, regulation, and efficiency: Evidence from the European Union," Journal of Financial Stability, Elsevier, vol. 8(4), pages 292-302.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kao, Chiang, 2014. "Network data envelopment analysis: A review," European Journal of Operational Research, Elsevier, vol. 239(1), pages 1-16.
    2. Lozano, Sebastián, 2016. "Slacks-based inefficiency approach for general networks with bad outputs: An application to the banking sector," Omega, Elsevier, vol. 60(C), pages 73-84.
    3. Huang, Tai-Hsin & Lin, Chung-I & Wu, Ruei-Cian, 2019. "Assessing the marketing and investment efficiency of Taiwan’s life insurance firms under network structures," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 132-147.
    4. Mohamed Dia & Amirmohsen Golmohammadi & Pawoumodom M. Takouda, 2020. "Relative Efficiency of Canadian Banks: A Three-Stage Network Bootstrap DEA," JRFM, MDPI, vol. 13(4), pages 1-25, April.
    5. Vaneet Bhatia & Sankarshan Basu & Subrata Kumar Mitra & Pradyumna Dash, 2018. "A review of bank efficiency and productivity," OPSEARCH, Springer;Operational Research Society of India, vol. 55(3), pages 557-600, November.
    6. Azadi, Majid & Shabani, Amir & Khodakarami, Mohsen & Farzipoor Saen, Reza, 2015. "Reprint of “Planning in feasible region by two-stage target-setting DEA methods: An application in green supply chain management of public transportation service providers”," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 74(C), pages 22-36.
    7. Qingxian An & Haoxun Chen & Jie Wu & Liang Liang, 2015. "Measuring slacks-based efficiency for commercial banks in China by using a two-stage DEA model with undesirable output," Annals of Operations Research, Springer, vol. 235(1), pages 13-35, December.
    8. Wu, Yueh-Cheng & Wei Kiong Ting, Irene & Lu, Wen-Min & Nourani, Mohammad & Kweh, Qian Long, 2016. "The impact of earnings management on the performance of ASEAN banks," Economic Modelling, Elsevier, vol. 53(C), pages 156-165.
    9. Azadi, Majid & Shabani, Amir & Khodakarami, Mohsen & Farzipoor Saen, Reza, 2014. "Planning in feasible region by two-stage target-setting DEA methods: An application in green supply chain management of public transportation service providers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 324-338.
    10. AGRELL, Per & HATAMI-MARBINI, Adel, 2011. "Frontier-based performance analysis models for supply chain management; state of the art and research directions," LIDAM Discussion Papers CORE 2011069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Xiao, Huijuan & Wang, Daoping & Qi, Yu & Shao, Shuai & Zhou, Ya & Shan, Yuli, 2021. "The governance-production nexus of eco-efficiency in Chinese resource-based cities: A two-stage network DEA approach," Energy Economics, Elsevier, vol. 101(C).
    12. Lu, Wen-Min & Liu, John S. & Kweh, Qian Long & Wang, Chung-Wei, 2016. "Exploring the benchmarks of the Taiwanese investment trust corporations: Management and investment efficiency perspectives," European Journal of Operational Research, Elsevier, vol. 248(2), pages 607-618.
    13. Huang, Tai-Hsin & Chen, Kuan-Chen & Lin, Chung-I, 2018. "An extension from network DEA to copula-based network SFA: Evidence from the U.S. commercial banks in 2009," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 51-62.
    14. Xiaohong Liu & Feng Yang & Jie Wu, 2020. "DEA considering technological heterogeneity and intermediate output target setting: the performance analysis of Chinese commercial banks," Annals of Operations Research, Springer, vol. 291(1), pages 605-626, August.
    15. Victor John M. Cantor & Kim Leng Poh, 2020. "Efficiency measurement for general network systems: a slacks-based measure model," Journal of Productivity Analysis, Springer, vol. 54(1), pages 43-57, August.
    16. Liu, John S. & Lu, Louis Y.Y. & Lu, Wen-Min, 2016. "Research fronts in data envelopment analysis," Omega, Elsevier, vol. 58(C), pages 33-45.
    17. Jiawei Yang, 2023. "Disentangling the sources of bank inefficiency: a two-stage network multi-directional efficiency analysis approach," Annals of Operations Research, Springer, vol. 326(1), pages 369-410, July.
    18. Zhao, Linlin & Zhu, Qingyuan & Zhang, Lin, 2021. "Regulation adaptive strategy and bank efficiency: A network slacks-based measure with shared resources," European Journal of Operational Research, Elsevier, vol. 295(1), pages 348-362.
    19. Liu, Wenbin & Zhou, Zhongbao & Ma, Chaoqun & Liu, Debin & Shen, Wanfang, 2015. "Two-stage DEA models with undesirable input-intermediate-outputs," Omega, Elsevier, vol. 56(C), pages 74-87.
    20. Wen-Min Lu & Qian Long Kweh & Chung-Wei Wang, 2021. "Integration and application of rough sets and data envelopment analysis for assessments of the investment trusts industry," Annals of Operations Research, Springer, vol. 296(1), pages 163-194, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:43:y:2022:i:7:p:2863-2874. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.