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Data envelopment analysis applied to financial statements

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  • Smith, P

Abstract

Ratio analysis has been a tool of analysts for as long as financial statements have been prepared. Yet its limitation to considering only one numerator and one denominator severely limits its usefulness. This paper extends the traditional ratio analysis to permit the incorporation of any number of dimensions of performance, using data envelopment analysis. The method produces measures of corporate efficiency, together with a wealth of supporting information. The strengths and weaknesses of the method applied to financial statements are appraised.

Suggested Citation

  • Smith, P, 1990. "Data envelopment analysis applied to financial statements," Omega, Elsevier, vol. 18(2), pages 131-138.
  • Handle: RePEc:eee:jomega:v:18:y:1990:i:2:p:131-138
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    Citations

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    Cited by:

    1. Gonzalo Rodríguez‐Pérez & John Slof & Magda Solà & Margarita Torrent & Immaculada Vilardell, 2011. "Assessing the Impact of Fair‐Value Accounting on Financial Statement Analysis: A Data Envelopment Analysis Approach," Abacus, Accounting Foundation, University of Sydney, vol. 47(1), pages 61-84, March.
    2. Isidoro Guzmán & Stephen Morrow, 2007. "Measuring efficiency and productivity in professional football teams: evidence from the English Premier League," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 15(4), pages 309-328, November.
    3. Chen, Po-Chi & Yu, Ming-Miin & Chang, Ching-Cheng & Hsu, Shih-Hsun & Managi, Shunsuke, 2015. "The enhanced Russell-based directional distance measure with undesirable outputs: Numerical example considering CO2 emissions," Omega, Elsevier, vol. 53(C), pages 30-40.
    4. Kerstens, Kristiaan & Van de Woestyne, Ignace, 2009. "Negative Data in DEA: A Simple Proportional Distance Function Approach," Working Papers 2009/04, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    5. George Emmanuel Halkos & Nickolaos Tzeremes, 2010. "Measuring regional economic efficiency: the case of Greek prefectures," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 45(3), pages 603-632, December.
    6. repec:pal:jorsoc:v:58:y:2007:i:9:d:10.1057_palgrave.jors.2602247 is not listed on IDEAS
    7. Scheel, Holger, 2001. "Undesirable outputs in efficiency valuations," European Journal of Operational Research, Elsevier, vol. 132(2), pages 400-410, July.
    8. Isidoro Guzmán Raja & Narciso Arcas Lario & Domingo García Pérez de Lema, 2006. "La eficiencia técnica como medida de rendimiento de las cooperativas agrarias," CIRIEC-España, revista de economía pública, social y cooperativa, CIRIEC-España, issue 55, pages 289-311, August.
    9. Eskelinen, Juha & Halme, Merja & Kallio, Markku, 2014. "Bank branch sales evaluation using extended value efficiency analysis," European Journal of Operational Research, Elsevier, vol. 232(3), pages 654-663.
    10. Photis Panayides & Neophytos Lambertides, 2011. "Fundamental Analysis and Relative Efficiency of Maritime Firms: Dry Bulk vs Tanker Firms," Chapters,in: International Handbook of Maritime Economics, chapter 5 Edward Elgar Publishing.
    11. Al-Shammari, Minwir, 1999. "Optimization modeling for estimating and enhancing relative efficiency with application to industrial companies," European Journal of Operational Research, Elsevier, vol. 115(3), pages 488-496, June.
    12. Halkos, George & Tzeremes, Nickolaos, 2005. "A DEA approach to regional development," MPRA Paper 3992, University Library of Munich, Germany.
    13. Halkos, George & Tzeremes, Nickolaos, 2011. "A nonparametric analysis of the Greek renewable energy sector," MPRA Paper 30467, University Library of Munich, Germany.
    14. Cecilio Mar-Molinero & Carlos Serrano-Cinca, 2001. "Bank failure: a multidimensional scaling approach," The European Journal of Finance, Taylor & Francis Journals, vol. 7(2), pages 165-183.
    15. Paradi, Joseph C. & Zhu, Haiyan, 2013. "A survey on bank branch efficiency and performance research with data envelopment analysis," Omega, Elsevier, vol. 41(1), pages 61-79.
    16. Maria Cristina Abad Navarro, 2003. "Utilidad de una Medida de la Eficiencia en la Generación de Ventas para la Predicción del Resultado," Working Papers 0307, Departament Empresa, Universitat Autònoma de Barcelona, revised Sep 2003.
    17. M. Eyni & G. Tohidi & S. Mehrabeian, 2017. "Applying inverse DEA and cone constraint to sensitivity analysis of DMUs with undesirable inputs and outputs," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(1), pages 34-40, January.
    18. Halkos, George E. & Tzeremes, Nickolaos G., 2012. "Analyzing the Greek renewable energy sector: A Data Envelopment Analysis approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(5), pages 2884-2893.
    19. Kyuseok Lee & Kyuwan Choi, 2010. "Cross redundancy and sensitivity in DEA models," Journal of Productivity Analysis, Springer, vol. 34(2), pages 151-165, October.
    20. Meryem Duygun & Silvia Pazzi & Emili Tortosa-Ausina & Simona Zambelli, 2014. "Does local public ownership matter for the efficiency of water utilities? Evidence from Italy," Working Papers 2014/21, Economics Department, Universitat Jaume I, Castellón (Spain).

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