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Satisficing data envelopment analysis: a Bayesian approach for peer mining in the banking sector

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Abstract

Over the past few decades, the banking sectors in Latin America have undergone rapid structural changes to improve the efficiency and resilience of their financial systems. The up-to-date literature shows that all the research studies conducted to analyze the above-mentioned efficiency are based on a deterministic data envelopment analysis (DEA) model or econometric frontier approach. Nevertheless, the deterministic DEA model suffers from a possible lack of statistical power, especially in a small sample. As such, the current research paper develops the technique of satisficing DEA to examine the still less explored case of Peru. We propose a Satisficing DEA model applied to 14 banks operating in Peru to evaluate the bank-level efficiency under a stochastic environment, which is free from any theoretical distributional assumption. The proposed model does not only report the bank efficiency, but also proposes a new framework for peer mining based on the Bayesian analysis and potential improvements with the bias-corrected and accelerated confidence interval. Our study is the first of its kind in the literature to perform a peer analysis based on a probabilistic approach.

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Acknowledgements

We would like to thank the Editors and the three anonymous reviewers for their helpful comments on the previous version of this manuscript.

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Authors and Affiliations

  1. Buckingham Business School, University of Buckingham, Hunter Street, Buckingham, MK18 1EG, UK

    Vincent Charles

  2. School of Applied Mathematics and Physics, National Technical University of Athens, 9 Iroon Polytechniou Str, Zografou Campus, 15780, Athens, Greece

    Ioannis E. Tsolas

  3. School of Business and Economics, Loughborough University, Loughborough, LE11 3TU, UK

    Tatiana Gherman

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Charles, V., Tsolas, I.E. & Gherman, T. Satisficing data envelopment analysis: a Bayesian approach for peer mining in the banking sector. Ann Oper Res 269, 81–102 (2018). https://doi.org/10.1007/s10479-017-2552-x

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