A new inverse DEA method for merging banks

Said Gattoufi, Gholam R. Amin, Ali Emrouznejad*

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This study suggests a novel application of Inverse Data Envelopment Analysis (InvDEA) in strategic decision making about mergers and acquisitions in banking. The conventional DEA assesses the efficiency of banks based on the information gathered about the quantities of inputs used to realize the observed level of outputs produced. The decision maker of a banking unit willing to merge/acquire another banking unit needs to decide about the inputs and/or outputs level if an efficiency target for the new banking unit is set. In this paper, a new InvDEA-based approach is developed to suggest the required level of the inputs and outputs for the merged bank to reach a predetermined efficiency target. This study illustrates the novelty of the proposed approach through the case of a bank considering merging with or acquiring one of its competitors to synergize and realize higher level of efficiency. A real data set of 42 banking units in Gulf Corporation Council countries is used to show the practicality of the proposed approach.

Original languageEnglish
Pages (from-to)73-87
Number of pages15
JournalIMA Journal of Mathematics Management
Volume25
Issue number1
Early online date12 Dec 2012
DOIs
Publication statusPublished - 1 Jan 2014

Keywords

  • data envelopment analysis
  • DEA
  • inverse DEA
  • bank
  • M&As
  • GCC

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