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Profitability and Marketability of the Top 55 U.S. Commercial Banks

Author

Listed:
  • Lawrence M. Seiford

    (Department of Mechanical & Industrial Engineering, University of Massachusetts at Amherst, Amherst, Massachusetts 01003)

  • Joe Zhu

    (Department of Management, Worcester Polytechnic Institute, Worcester, Massachusetts 01609)

Abstract

Utilizing recent developments in data envelopment analysis (DEA), this paper examines the performance of the top 55 U.S. commercial banks via a two-stage production process that separates profitability and marketability. Substantial performance inefficiency is uncovered in both dimensions. Relatively large banks exhibit better performance on profitability, whereas smaller banks tend to perform better with respect to marketability. New context-dependent performance measures are defined for profitability and marketability which employ a DEA stratification model and a DEA attractiveness measure. When combined with the original DEA measure, the context-dependent performance measure better characterizes the profitability and marketability of 55 U.S. commercial banks. The new approach identifies areas for improved bank performance over the two-stage production process. The effect of acquisition on efficiency and attractiveness is also examined.

Suggested Citation

  • 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.
  • Handle: RePEc:inm:ormnsc:v:45:y:1999:i:9:p:1270-1288
    DOI: 10.1287/mnsc.45.9.1270
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    References listed on IDEAS

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