Profitability of a sample of Portuguese bank branches and its decomposition into technical and allocative components

Maria C.A. Silva Portela, Emmanuel Thanassoulis

Research output: Contribution to journalArticle

Abstract

The efficiency literature, both using parametric and non-parametric methods, has been focusing mainly on cost efficiency analysis rather than on profit efficiency. In for-profit organisations, however, the measurement of profit efficiency and its decomposition into technical and allocative efficiency is particularly relevant. In this paper a newly developed method is used to measure profit efficiency and to identify the sources of any shortfall in profitability (technical and/or allocative inefficiency). The method is applied to a set of Portuguese bank branches first assuming long run and then a short run profit maximisation objective. In the long run most of the scope for profit improvement of bank branches is by becoming more allocatively efficient. In the short run most of profit gain can be realised through higher technical efficiency. © 2003 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)850-866
Number of pages17
JournalEuropean Journal of Operational Research
Volume162
Issue number3
DOIs
Publication statusPublished - 1 May 2005

Fingerprint

Profitability
profitability
Profit
bank
profit
Branch
Decomposition
Decompose
efficiency
Technical Efficiency
Long-run
efficiency analysis
profit maximization
Allocative Efficiency
Cost Efficiency
Nonparametric Methods
Banks
Profit efficiency
Bank branches
High Efficiency

Bibliographical note

© 2005, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • bank branches
  • sata envelopment analysis
  • profit efficiency

Cite this

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Profitability of a sample of Portuguese bank branches and its decomposition into technical and allocative components. / Silva Portela, Maria C.A.; Thanassoulis, Emmanuel.

In: European Journal of Operational Research, Vol. 162, No. 3, 01.05.2005, p. 850-866.

Research output: Contribution to journalArticle

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AU - Thanassoulis, Emmanuel

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