Measuring Taiwanese bank performance: A two-system dynamic network data envelopment analysis approach

Abstract

This paper deals with the heterogeneity problem related to the determination of meta-technology when measuring performance in a dynamic setting. The authors propose a new way of constructing the non-convex meta-framework of the dynamic network data envelopment analysis. This new approach differs from the minimum extrapolation principle on the aggregation of individual group technologies. The proposed model preserves the role of each group's technology in the determination of the proposed non-convex meta-technology. The proposed model also considers the linking activities between the processes and the carry-over activities between two consecutive terms, illustrated by means of a real-world example from banking that simultaneously evaluates: deposit, lending, period, deposit-period and lending-period efficiencies for 22 Taiwanese banks from 2008 to 2016. The empirical results indicate that lending efficiency outperforms deposit efficiency during the sample period, and thus the improvement in deposit activity has a positive effect on banks' overall performance. The results also imply that non-FHC banks outperform FHC banks on average in terms of both the deposit and lending processes, but the effect is not statistically significant. (C) 2019 Elsevier Ltd. All rights reserved.