Combining DEA window analysis with the Malmquist index approach in a study of the Canadian banking industry

TY - JOUR

T1 - Combining DEA window analysis with the Malmquist index approach in a study of the Canadian banking industry

AU - Asmild, Mette

AU - Paradi, Joseph C.

AU - Aggarwall, Vanita

AU - Schaffnit, Claire

PY - 2004

Y1 - 2004

N2 - The banking industry in Canada is essentially an oligopoly with five large participants controlling about 90% of the market. To evaluate the industry's performance over time, we need to deal with the problem of a small number of DMU's compared to the number of relevant inputs and outputs. To overcome this problem we use data envelopment analysis (DEA) window analysis, whereby efficiency scores for the 20 year period 1981-2000 are obtained. To measure productivity changes over time, Malmquist indices can be calculated from DEA scores. Using DEA window analysis scores, however, raise the question of how to define the "same period frontier" in a DEA window analysis. We show that for both the adjacent and the base period Malmquist index and for all suggested definitions of same period frontier, the standard decomposition into frontier shift and catching up effects gives inappropriate results when Malmquist indices are based on DEA window analysis scores.

AB - The banking industry in Canada is essentially an oligopoly with five large participants controlling about 90% of the market. To evaluate the industry's performance over time, we need to deal with the problem of a small number of DMU's compared to the number of relevant inputs and outputs. To overcome this problem we use data envelopment analysis (DEA) window analysis, whereby efficiency scores for the 20 year period 1981-2000 are obtained. To measure productivity changes over time, Malmquist indices can be calculated from DEA scores. Using DEA window analysis scores, however, raise the question of how to define the "same period frontier" in a DEA window analysis. We show that for both the adjacent and the base period Malmquist index and for all suggested definitions of same period frontier, the standard decomposition into frontier shift and catching up effects gives inappropriate results when Malmquist indices are based on DEA window analysis scores.

KW - Canadian banking

KW - DEA window analysis

KW - Decomposition

KW - Malmquist index

U2 - 10.1023/B:PROD.0000012453.91326.ec

DO - 10.1023/B:PROD.0000012453.91326.ec

M3 - Journal article

AN - SCOPUS:1842682773

SN - 0895-562X

VL - 21

SP - 67

EP - 89

JO - Journal of Productivity Analysis

JF - Journal of Productivity Analysis

IS - 1

ER -