A classification method for banks' profitability using revised Thompson-Thrall profit ratios in DEA and cluster analysis with an application to South Asian banks

P Sunil Dharmapala, Piyadasa Edirisuriya

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    6 Citations (Scopus)

    Abstract

    Many researchers in the past have addressed the issue of profitability of banks from different perspectives using financial ratios and decision models. Thompson et al. (1995) addressed this issue by introducing linked-cone (LC) profit ratios with assurance regions (AR) in data envelopment analysis. In this paper, we propose a method to revise LC-AR and show a contrast between Thompson-Thrall s and revised profit ratios. In an application of revised profit ratios to a set of South Asian banks, we classify them as profit-makers, loss-makers or neither. Then, analysing the banks profitability using cluster analysis with financial ratios and revised profit ratios, we show how to strengthen the classification.
    Original languageEnglish
    Pages (from-to)147 - 169
    Number of pages23
    JournalInternational Journal of Operational Research
    Volume15
    Issue number2
    DOIs
    Publication statusPublished - 2012

    Cite this

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    abstract = "Many researchers in the past have addressed the issue of profitability of banks from different perspectives using financial ratios and decision models. Thompson et al. (1995) addressed this issue by introducing linked-cone (LC) profit ratios with assurance regions (AR) in data envelopment analysis. In this paper, we propose a method to revise LC-AR and show a contrast between Thompson-Thrall s and revised profit ratios. In an application of revised profit ratios to a set of South Asian banks, we classify them as profit-makers, loss-makers or neither. Then, analysing the banks profitability using cluster analysis with financial ratios and revised profit ratios, we show how to strengthen the classification.",
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