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DEA efficiency of German savings banks: evidence from a goal-oriented perspective

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Abstract

We provide one of very few Data envelopment analysis efficiency studies of the German savings banks, thereby contributing evidence on the credit of their business model. This model distinguishes itself by the ultimate purposes to ensure public access to financial services and to support regional economies. To capture the respective goal set of the German savings banks, we propose a framework incorporating rationality concepts of decision making to derive appropriate performance criteria. On this basis, the 2006–2011 analysis reveals the active role of the savings banks in stabilizing the German economy during the financial crisis 2008–2009. The results also suggest that the banks are more efficient in fulfilling their public mandate than in generating profit. Furthermore, a stable scale efficiency pattern is observed, particularly showing that larger banks are experiencing notable decreasing returns to scale.

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Notes

  1. More details about the framework and its application can be found in Le and Ahn (2014).

  2. The decision making criteria represent different goal systems which direct how decisions should be made. In this study, “decision making criteria” is used as a collective term for values, goals, performance objectives and performance factors which will be clarified in the following.

  3. The construction of value functions of input and output factors to operationalize objectives corresponds with the underlying idea of a generalized DEA approach proposed by Dyckhoff and Allen (2001).

  4. Non-interest expenses = personnel expenses + other operating expenses. It is acknowledged here that a possible contradiction in the models may arise since the number of employees has been above selected as the proxy to illustrate objectives for maximizing. We tried to diminish the resulted shortcoming by not directly taking personnel expenses for minimizing. It can be interpreted that to be more efficient, banks are suggested to focus more on saving other operating expenses and interest expenses. With objectives to widen the branch networks and ensure banking service accessibility, it is more challenging and less desirable to cut the personnel expenses itself. If data is available, it is recommended that the number of branches can be a better proxy.

  5. More details on the construction of value functions of input and output factors have been illustrated in Dyckhoff and Ahn (2010).

  6. DEA results are sensitive in the way that when the number of performance criteria increase, ceteris paribus the proportion of DMUs rated as efficient as well as the average efficiency score of all DMUs increase accordingly. See Epstein and Henderson (1989) for an discussion on this issue.

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Acknowledgments

The support from the Vietnamese Ministry of Education and Training in terms of the Government Scholarship is gratefully acknowledged. The authors would like to thank the two anonymous reviewers for their helpful and constructive comments.

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Authors and Affiliations

  1. Institute of Management Control and Business Accounting, Technische Universität Braunschweig, Fallersleber-Tor-Wall 23, 38100, Brunswick, Germany

    Heinz Ahn & Minh Hanh Le

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  1. Heinz Ahn
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  2. Minh Hanh Le
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Correspondence to Heinz Ahn.

Appendix

Appendix

See Tables 10, 11 and 12.

Table 10 Descriptive statistics of the variables in the intermediation efficiency model
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Table 11 Descriptive statistics of the variables in the production efficiency model
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Table 12 Descriptive statistics of the variables in the profit efficiency model
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Ahn, H., Le, M.H. DEA efficiency of German savings banks: evidence from a goal-oriented perspective. J Bus Econ 85, 953–975 (2015). https://doi.org/10.1007/s11573-015-0769-1

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