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Ranking with a Euclidean common set of weights in data envelopment analysis: with application to the Eurozone banking sector

Author

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  • Helmi Hammami

    (Rennes School of Business)

  • Thanh Ngo

    (Massey University
    VNU University of Economics and Business)

  • David Tripe

    (Massey University)

  • Dinh-Tri Vo

    (IPAG Business School
    University of Economics Ho Chi Minh City)

Abstract

This paper provides a new method to define a Euclidean common set of weights (ECSW) in data development analysis (DEA) that (1) allows ranking both efficient and inefficient firms, (2) is more realistic in terms of determination of weights, and (3) generates rankings for banks consistent with their credit ratings. We first use DEA to determine the efficient frontier and then estimate a common set of weights that can minimize the Euclidean distance between the firms and that frontier. This process is illustrated by a simple numerical example and is extended to a real-life situation using the Eurozone banking sector. Our ECSW approach outperforms other common set of weights approaches in both numerical and real-life examples, and in terms of providing rankings consistent with banks’ credit ratings.

Suggested Citation

  • Helmi Hammami & Thanh Ngo & David Tripe & Dinh-Tri Vo, 2022. "Ranking with a Euclidean common set of weights in data envelopment analysis: with application to the Eurozone banking sector," Annals of Operations Research, Springer, vol. 311(2), pages 675-694, April.
    • Handle: RePEc:spr:annopr:v:311:y:2022:i:2:d:10.1007_s10479-020-03759-6
    DOI: 10.1007/s10479-020-03759-6
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    Cited by:

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    2. Thanh Ngo & Hai‐Dang Nguyen & Huong Ho & Vo‐Kien Nguyen & Thuy T. T. Dao & Hai T. H. Nguyen, 2021. "Assessing the important factors of sustainable agriculture development: An Indicateurs de Durabilité des Exploitations Agricoles‐Analytic Hierarchy Process study in the northern region of Vietnam," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(2), pages 327-338, March.
    3. Nam Hyok Kim & Feng He & Kwon Ryong Hong & Hyok-Chol Kim & Sok-Min Han, 2024. "A new common weights DEA model based on cluster analysis," Operational Research, Springer, vol. 24(2), pages 1-35, June.
    4. Jiawei Yang, 2023. "Disentangling the sources of bank inefficiency: a two-stage network multi-directional efficiency analysis approach," Annals of Operations Research, Springer, vol. 326(1), pages 369-410, July.
    5. Sabri Boubaker & T.D.Q. Le & T. Ngo & R. Manita, 2023. "Predicting the Performance of MSMEs: A Hybrid DEA-machine Learning Approach," Post-Print hal-04434027, HAL.
    6. Thanh Ngo & Tu DQ Le & Dat T Nguyen & Tin H Ho, 2023. "Determinants Of Bank Performance: Revisiting The Role Of Ceo’S Personality Traits Using Graphology," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(2), pages 289-310, May.
    7. Kim, Nam Hyok & He, Feng & Kwon, O Chol, 2023. "Combining common-weights DEA window with the Malmquist index: A case of China’s iron and steel industry," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).
    8. Sabri Boubaker & T.D.Q. Le & T. Ngo, 2023. "Managing Bank Performance under COVID-19: A Novel Inverse DEA Efficiency Approach," Post-Print hal-04435441, HAL.
    9. Thanh Ngo & David Tripe & Duc Khuong Nguyen, 2024. "Estimating the productivity of US agriculture: The Fisher total factor productivity index for time series data with unknown prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 68(3), pages 701-712, July.
    10. Hamid Kiaei & Reza Kazemi Matin, 2022. "New common set of weights method in black-box and two-stage data envelopment analysis," Annals of Operations Research, Springer, vol. 309(1), pages 143-162, February.
    11. Mostafa Davtalab-Olyaie & Hadis Mahmudi-Baram & Masoud Asgharian, 2023. "Measuring individual efficiency and unit influence in centrally managed systems," Annals of Operations Research, Springer, vol. 321(1), pages 139-164, February.
    12. Xuan Thi Thanh Mai & Ha Thi Nhu Nguyen & Thanh Ngo & Tu D. Q. Le & Lien Phuong Nguyen, 2023. "Efficiency of the Islamic Banking Sector: Evidence from Two-Stage DEA Double Frontiers Analysis," IJFS, MDPI, vol. 11(1), pages 1-14, February.

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