How to better identify the true managerial performance: State of the art using DEA
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.
Volume (Year): 36 (2008)
Issue (Month): 2 (April)
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- 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.
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Applied Financial Economics,
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- José Manuel Pastor Monsálvez, 1999. "- Credit Risk And Efficiency In The European Banking Systems: A Three-Stage Analysis," Working Papers. Serie EC 1999-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- 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.
- 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.
- 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.
- 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.
- 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. Full references (including those not matched with items on IDEAS)
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