Performance and managerial ability analysis in banking sector: a fuzzy data envelopment analysis approach

Abstract

Technical efficiency and managerial ability are two key performance indicators in managing business enterprises. Although many attempts have been made to calculate technical efficiency in the data envelopment analysis (DEA) framework, however, few studies have been conducted on calculating managerial ability using DEA. In DEA literature, the estimation of the managerial ability of firms using the deterministic efficiency models may be sensitive to the uncertainty of the input/output data of any production process. In this contribution, we, therefore, introduce a DEA-based procedure to develop a measure of managerial ability. The proposed fuzzy efficiency procedure is applied to sample data on 100 banks in China to compare inferences about their managerial ability. Though the application of our proposed fuzzy managerial ability procedure is illustrative, it can, however, be potentially applied to firms facing fuzzy-type uncertainty in the economy.