Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations]
Background Data Envelopment Analysis (DEA) methodology is considered the most suitable approach for relative performance efficiency calculation for banks as it is believed to be superior to traditional ratio-based analysis and other conventional performance evaluations. This study provides statistic...
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F1000 Research Ltd
2024-11-01
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| author | Sachin R Chandra Raksha Jain Shivaprasad S P Geetha E Kishore L |
| author_facet | Sachin R Chandra Raksha Jain Shivaprasad S P Geetha E Kishore L |
| author_sort | Sachin R Chandra |
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| description | Background Data Envelopment Analysis (DEA) methodology is considered the most suitable approach for relative performance efficiency calculation for banks as it is believed to be superior to traditional ratio-based analysis and other conventional performance evaluations. This study provides statistical evidence on the sampling error that can creep into performance evaluation studies using the DEA methodology. Inferences are drawn based on samples, and various preventive measures must be taken to eliminate or avoid sampling errors and misleading results. This study demonstrates the possibility of sampling error in DEA with the secondary data available in financial statements and reports from a sample set of banks. Methods The samples included 15 public sectors and five leading private sector banks in India based on their market share, and the data for calculating efficiencies were retrieved from the published audited reports. The sample data was collected from 2014 to 2017 because the banking sector in India witnessed a series of mergers of public sector banks post-2017, and the data after that would be skewed and not comparable due to the demonetization policy implementation and merger process-related consolidation implemented by the Government of India. The efficiency measures thus computed are further analyzed using non-parametric statistical tests. Results We found statistically significant discrepancies in the efficiency score calculations using DEA approach when specific outlier values. Evidence is provided on statistically significant differences in the efficiencies due to the inclusion and exclusion of particular samples in the DEA. Conclusion The study offers a novel contribution along with statistical evidence on the possible sampling error that can creep into the performance evaluation of organizations while applying the DEA methodology. |
| format | Article |
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| language | English |
| publishDate | 2024-11-01 |
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| spelling | doaj-art-cd5260ba30c340f595d2e7166039d0be2025-08-20T02:13:53ZengF1000 Research LtdF1000Research2046-14022024-11-011310.12688/f1000research.153125.2174428Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations]Sachin R Chandra0Raksha Jain1Shivaprasad S P2https://orcid.org/0000-0003-2253-6108Geetha E3Kishore L4https://orcid.org/0000-0001-9024-0435Department of Commerce, Manipal Academy of Higher Education, Manipal, Karnataka, 576104, IndiaDepartment of Commerce, Manipal Academy of Higher Education, Manipal, Karnataka, 576104, IndiaSchool of Business, RV University, Bengaluru, Karnataka, 560059, IndiaDepartment of Commerce, Manipal Academy of Higher Education, Manipal, Karnataka, 576104, IndiaDepartment of Commerce, Manipal Academy of Higher Education, Manipal, Karnataka, 576104, IndiaBackground Data Envelopment Analysis (DEA) methodology is considered the most suitable approach for relative performance efficiency calculation for banks as it is believed to be superior to traditional ratio-based analysis and other conventional performance evaluations. This study provides statistical evidence on the sampling error that can creep into performance evaluation studies using the DEA methodology. Inferences are drawn based on samples, and various preventive measures must be taken to eliminate or avoid sampling errors and misleading results. This study demonstrates the possibility of sampling error in DEA with the secondary data available in financial statements and reports from a sample set of banks. Methods The samples included 15 public sectors and five leading private sector banks in India based on their market share, and the data for calculating efficiencies were retrieved from the published audited reports. The sample data was collected from 2014 to 2017 because the banking sector in India witnessed a series of mergers of public sector banks post-2017, and the data after that would be skewed and not comparable due to the demonetization policy implementation and merger process-related consolidation implemented by the Government of India. The efficiency measures thus computed are further analyzed using non-parametric statistical tests. Results We found statistically significant discrepancies in the efficiency score calculations using DEA approach when specific outlier values. Evidence is provided on statistically significant differences in the efficiencies due to the inclusion and exclusion of particular samples in the DEA. Conclusion The study offers a novel contribution along with statistical evidence on the possible sampling error that can creep into the performance evaluation of organizations while applying the DEA methodology.https://f1000research.com/articles/13-890/v2Sampling Error; Performance Evaluation; Efficiency; Data Envelopment Analysis; Non-parametric Tests; Banking industryeng |
| spellingShingle | Sachin R Chandra Raksha Jain Shivaprasad S P Geetha E Kishore L Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations] F1000Research Sampling Error; Performance Evaluation; Efficiency; Data Envelopment Analysis; Non-parametric Tests; Banking industry eng |
| title | Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations] |
| title_full | Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations] |
| title_fullStr | Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations] |
| title_full_unstemmed | Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations] |
| title_short | Discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology: evidence from the banking sector [version 2; peer review: 1 approved, 2 approved with reservations] |
| title_sort | discrepancy in efficiency scores due to sampling error in data envelopment analysis methodology evidence from the banking sector version 2 peer review 1 approved 2 approved with reservations |
| topic | Sampling Error; Performance Evaluation; Efficiency; Data Envelopment Analysis; Non-parametric Tests; Banking industry eng |
| url | https://f1000research.com/articles/13-890/v2 |
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