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A Slacks-based Measure DEA Methodology for Identification of Returns to Scale in the Slovak Banking Sector

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  • Martin Boďa

    (Department of Quantitative Methods and Information Systems, Faculty of Economics, Matej Bel University in Banská Bystrica, Národná 12, 974 01 Banská Bystrica, Slovak Republic)

Abstract

Taking into consideration that knowing the nature of scale of operations is important both to size optimization and to technical efficiency measurement, the paper aims to identify for individual commercial banks of the Slovak banking sector the scale of their operations as exhibited by their production activities during the period from 2000 and 2012. To this end, the DEA procedure of Tone and Sahoo utilizing the concept of the degree of scale elasticity is enhanced and combined with the framework of the SBM model. The analysis of scale is conducted for the major 11 Slovak commercial banks under the prism of the production approach to banking operations, in which the economic assumption that three solid phases can be singled out in the development of the Slovak banking sector is made. The results confirm that the largest Slovak commercial banks were in the investigated period already "too large" so as to gain potentially some benefit from expanding their depository and creditory services by increasing their inputs.

Suggested Citation

  • Martin Boďa, 2015. "A Slacks-based Measure DEA Methodology for Identification of Returns to Scale in the Slovak Banking Sector," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(6), pages 1847-1858.
    • Handle: RePEc:mup:actaun:actaun_2015063061847
    DOI: 10.11118/actaun201563061847
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    References listed on IDEAS

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    1. Tone, Kaoru & Sahoo, Biresh K., 2003. "Scale, indivisibilities and production function in data envelopment analysis," International Journal of Production Economics, Elsevier, vol. 84(2), pages 165-192, May.
    2. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (II): Applications of the Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 2, number fuss1978a.
    3. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    4. Banker, Rajiv D., 1984. "Estimating most productive scale size using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 17(1), pages 35-44, July.
    5. Tone, Kaoru & Sahoo, Biresh K., 2004. "Degree of scale economies and congestion: A unified DEA approach," European Journal of Operational Research, Elsevier, vol. 158(3), pages 755-772, November.
    6. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (I): The Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number fuss1978.
    7. 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.
    8. William W. Cooper & Lawrence M. Seiford & Kaoru Tone, 2007. "Data Envelopment Analysis," Springer Books, Springer, edition 0, number 978-0-387-45283-8, November.
    9. Daniel Stavárek, 2006. "Banking Efficiency in the Context of European Integration," Eastern European Economics, Taylor & Francis Journals, vol. 44(4), pages 5-31, August.
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