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Disentangling the sources of bank inefficiency: a two-stage network multi-directional efficiency analysis approach

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  • Jiawei Yang

    (Donghua University)

Abstract

To disentangle the sources of bank inefficiency, this paper presents an extended two-stage network multi-directional efficiency analysis (NMEA) approach by taking the internal structure of the banking system into account. The proposed two-stage NMEA approach extends the conventional “black-box” MEA approach, providing a unique efficiency decomposition and identifying which variables drive the inefficiency for banking systems with a two-stage network structure. An empirical application of Chinese listed banks from 2016 to 2020 during the 13th Five-year Plan reveals that the overall inefficiency of sample banks is primarily sourced from the deposit-generating subsystem. Additionally, different types of banks display differentiated evolution modes over different dimensions, confirming the importance of applying the proposed two-stage NMEA approach.

Suggested Citation

  • Jiawei Yang, 2023. "Disentangling the sources of bank inefficiency: a two-stage network multi-directional efficiency analysis approach," Annals of Operations Research, Springer, vol. 326(1), pages 369-410, July.
    • Handle: RePEc:spr:annopr:v:326:y:2023:i:1:d:10.1007_s10479-023-05335-0
    DOI: 10.1007/s10479-023-05335-0
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