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Title: A multidimensional approach to measuring bank branch efficiency
Authors: Quaranta, Anna G.
Raffoni, Anna
Visani, Franco
Keywords: OR in banking
Bank efficiency
Data envelopment analysis
Multidimensional performance
Performance measurement systems
Issue Date: 2017
Publisher: © Elsevier
Citation: QUARANTA, A.G., RAFFONI, A. and VISANI, F., 2017. A multidimensional approach to measuring bank branch efficiency. European Journal of Operational Research, doi:10.1016/j.ejor.2017.10.009.
Abstract: Bank branch efficiency measurements range from simple ratio and standard regression analyses to more complex frontier approaches, each with specific strengths and weaknesses. However, in isolation, the indexes that these approaches generate fail to capture the multidimensional nature of bank branch efficiency. This paper develops a three-step procedure that enables combining the strengths of the existing approaches. We begin by taking the widest number of efficiency indexes proposed in literature (step 1), reduce the redundant information through a collinearity analysis (step 2), and categorize bank branches into efficiency classes through a clustering procedure (step 3). We test our approach on 23 branches of an Italian regional bank. The results show that this three-step approach is able to provide a multidimensional view of efficiency based on indexes employing a wide range of theoretical and methodological approaches with different ways of conceiving (intermediation vs. production) and measuring (stock, vs. flow, or physical measures) bank outputs and inputs, different definitions of efficiency (technical and cost efficiency), and different measurement approaches (ratios, standard regression analysis and frontier functions). The resulting efficiency ranking is consistent with those that univariate indexes generate and provides a balanced evaluation of branch efficiency when such indexes produce contradictory indications.
Description: This paper is closed access until 16th October 2019.
Version: Accepted for publication
DOI: 10.1016/j.ejor.2017.10.009
URI: https://dspace.lboro.ac.uk/2134/26990
Publisher Link: https://doi.org/10.1016/j.ejor.2017.10.009
ISSN: 0377-2217
Appears in Collections:Closed Access (Business School)

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