A decision model to predict profitability using revised Thompson-Thrall profit ratios in DEA 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) introduced linked-cone (LC) profit ratios with assurance regions (AR) in data envelopment analysis. In this paper, we revise LC-AR and show a contrast between Thompsona-Thrall s and revised profit ratios. We propose a decision model to classify banks as profit-makers, loss-makers or neither, when market prices that form AR are not available and hence LC-AR profit ratios do not exist. We demonstrate how this method works for a set of South Asian banks.
    Original languageEnglish
    Pages (from-to)407 - 429
    Number of pages23
    JournalInternational Journal of Operational Research
    Volume12
    Issue number4
    DOIs
    Publication statusPublished - 2011

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