Title: An analysis of Korean bank performance using chance-constrained data envelopment analysis

Authors: Yong Joo Lee; Seong-Jong Joo; Taewon Hwang

Addresses: Department of Finance and Supply Chain Management, College of Business, Central Washington University, 400 E. University Way, Ellensburg, WA 98926, USA ' Department of Operational Sciences, Air Force Institute of Technology, 2950 Hobson Way, WPAFB, OH 45433, USA ' Department of Management and Healthcare Administration, Langdale College of Business Administration, Valdosta State University, 1500 N. Patterson St., Valdosta, GA 31698, USA

Abstract: For measuring the performance of firms using data envelopment analysis (DEA), many studies assume that inputs and outputs are deterministic. For example, key indicators for financial institutes such as assets, deposits, number of employees and profits vary over time. Nonetheless, researchers take snapshots of these numbers and analyse them for performance measurement and benchmarking. Similarly, it is not an exception for the studies with DEA for Korean financial institutes. We allow inputs and/or outputs to be stochastic and analyse the comparative performance of Korean banks. We found that large or top five banks were inconsistent sensitivity on the variability of inputs and/or outputs across models. The contributions of our study include demonstrating DEA analysis using stochastic inputs and outputs for the Korean banks and providing realistic insights to the managers of the banks.

Keywords: performance measurement; benchmarking; data envelopment analysis; DEA; stochastic variables; Korean banks; chance constrained DEA.

DOI: 10.1504/IJOR.2020.108025

International Journal of Operational Research, 2020 Vol.38 No.4, pp.525 - 543

Received: 26 Oct 2016
Accepted: 06 Nov 2017

Published online: 19 Apr 2020 *

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