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Overlooked effect of negative data on efficiency analysis

Author

Listed:
  • Wen-Min Lu

    (Chinese Culture University)

  • Qian Long Kweh

    (Canadian University Dubai)

  • Irene Wei Kiong Ting

    (Universiti Malaysia Pahang Al-Sultan Abdullah)

Abstract

Financial data may contain nonpositive values, which can be addressed using logarithm transformation or the addition of constant. However, production scale is important when employing data envelopment analysis (DEA) to assess the efficiency of input-output transformation. Traditional techniques of handling negative data values in DEA, such as adding an arbitrary constant or substituting a small positive value, fail to account for the effect of production scale on efficiency and can produce misleading findings. This study thus proposes a novel method for dealing with negative output values in DEA by revising them based on production scale. Overall, this study enables better informed decision-making by improving the accuracy of efficiency assessments in complex data settings containing both positive and negative values.

Suggested Citation

  • Wen-Min Lu & Qian Long Kweh & Irene Wei Kiong Ting, 2025. "Overlooked effect of negative data on efficiency analysis," OPSEARCH, Springer;Operational Research Society of India, vol. 62(2), pages 1082-1091, June.
    • Handle: RePEc:spr:opsear:v:62:y:2025:i:2:d:10.1007_s12597-024-00797-7
    DOI: 10.1007/s12597-024-00797-7
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    References listed on IDEAS

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