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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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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.

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Authors and Affiliations

  1. Reykjavik University, Menntavegur 1, 101, Reykjavik, Iceland

    Desheng Dash Wu

  2. RiskLab, University of Toronto, 1 Spadina Crescent, Toronto, ON, M5S 3G3, Canada

    Desheng Dash Wu

  3. HSBC School of Business, Beijing University, Beijing, China

    Zhaoxin Zhou

  4. 5807 South Woodlawn Avenue, Chicago, IL, 60637-1610, USA

    John R. Birge

Authors
  1. Desheng Dash Wu
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  2. Zhaoxin Zhou
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  3. John R. Birge
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Correspondence to Desheng Dash Wu.

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Wu, D.D., Zhou, Z. & Birge, J.R. Estimation of potential gains from mergers in multiple periods: a comparison of stochastic frontier analysis and Data Envelopment Analysis. Ann Oper Res 186, 357–381 (2011). https://doi.org/10.1007/s10479-011-0903-6

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  • DOI: https://doi.org/10.1007/s10479-011-0903-6

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