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Measuring slacks-based efficiency for commercial banks in China by using a two-stage DEA model with undesirable output

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Abstract

Bank industry plays a critical role in the economic development of China. In this paper, we develop a new two-stage data envelopment analysis approach for measuring the slacks-based efficiency of Chinese commercial banks during years 2008–2012, where the banking operation process of each bank is divided into a deposit-generation stage (division) and a deposit-utilization stage (division). In the approach, the increase of desirable outputs and the decrease of undesirable outputs are simultaneously considered in order to identify the inefficiency of a bank. Three efficiency statuses are first defined for such a system to investigate its input-output performance and divisional performances, and a full efficiency status is then defined based on these statuses. The empirical results show that the improvement of the banks’ performances during this period was mainly contributed by the improvement of deposit-utilization stage. Besides, the results also show that our approach can provide a benchmark for the intermediate measures of the two stages of an inefficient bank.

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Acknowledgments

The research is supported by National Natural Science Funds of China (No. 71501189, 71222106, 71371194, 71571173 and 71110107024), Research Fund for the Doctoral Program of Higher Education of China (No. 20133402110028), Foundation for the Author of National Excellent Doctoral Dissertation of P. R. China (No. 201279), Research Fund for Innovation-driven Plan of Central South University (2015CX010) and The Fundamental Research Funds for the Central Universities (No. WK2040160008).

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Authors and Affiliations

  1. School of Business, Central South University, 932 Lushan South Road, Changsha, 410086, China

    Qingxian An

  2. Industrial Systems Optimization Laboratory, Charles Delaunay Institute and UMR CNRS 6281, University of Technology of Troyes, Troyes, 10004, France

    Haoxun Chen

  3. School of Management, University of Science and Technology of China, 96 Jinzhai Road, Hefei, 230026, China

    Jie Wu & Liang Liang

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  1. Qingxian An
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Correspondence to Jie Wu.

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An, Q., Chen, H., Wu, J. et al. Measuring slacks-based efficiency for commercial banks in China by using a two-stage DEA model with undesirable output. Ann Oper Res 235, 13–35 (2015). https://doi.org/10.1007/s10479-015-1987-1

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