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Estimation of potential gains from mergers in multiple periods: a comparison of stochastic frontier analysis and Data Envelopment Analysis

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  • Desheng Wu
  • Zhaoxin Zhou
  • John Birge

Abstract

A new dynamic Data Envelopment Analysis (DEA) approach is created to provide valuable managerial insights when assessing the merger performance. This new approach allows us to dynamically evaluate the pre-merger firms and the post-merger firm in a multi-period situation. A case study of bank branch merger is conducted to illustrate and validate the proposed approach. Both stochastic frontier analysis and data envelopment analysis are used and compared leading to highly correlated results. The computation show that merger results in an overall efficiency achievement in a banking industry. Copyright Springer Science+Business Media, LLC 2011

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  • Desheng Wu & Zhaoxin Zhou & John Birge, 2011. "Estimation of potential gains from mergers in multiple periods: a comparison of stochastic frontier analysis and Data Envelopment Analysis," Annals of Operations Research, Springer, vol. 186(1), pages 357-381, June.
    • Handle: RePEc:spr:annopr:v:186:y:2011:i:1:p:357-381:10.1007/s10479-011-0903-6
    DOI: 10.1007/s10479-011-0903-6
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