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English
Published
:
2016-08-30
An Innovative Approach to the Evaluation of Efficiency in the Financial Industry - The Case of Slovakia
Emília Zimková
Abstract
The financial industry is undergoing a period of rapid change in market share, competition, technology, and the demands of the consumer. The aim of the paper is to answer, how two of the most important fields of the financial industry, commercial banking, and insurance, can meet these challenges by introducing an innovative approach to the evaluation of their efficiency. An efficiency, which reflects the use of less input to maximize possible output, is one of the most important principles of any business. The problem arises in determining the efficiency of the Decision Making Units (DMUs), in our case, the commercial banks and insurances, which have more diverse inputs and outputs. The Data Envelopment Analysis (DEA) allows the analysis of the efficiencies of the observed entities by taking into consideration different combinations of input and output variables. Based on the results of this analysis, it can be determined how inefficient certain observed DMUs are in comparison with efficient ones. Moreover, this analysis can be used to deduce how much a DMU needs to decrease an input and/or increase its output to make the unit efficient. Thus, this paper evaluates the technical efficiency of the Slovak banking and insurance industries by use of the DEA, which reflects the economic theory on the production of banking and insurance services. This innovative approach can also be used as an ex-ante assessment of different policy scenarios. In order to analyse the impact of different strategies and goals of management policy, DEA models with restricted weights can be used.(original abstract)Keywords:
Banking sector, Insurance sector, Cost effectiveness, Data Envelopment Analysis (DEA)Most read articles by the same author(s)
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Zimková, E. (2016). An Innovative Approach to the Evaluation of Efficiency in the Financial Industry - The Case of Slovakia. Zeszyty Naukowe Wyższej Szkoły Bankowej W Poznaniu, 69(4). Retrieved from https://journals.wsb.poznan.pl/index.php/znwsb/article/view/896