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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    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
    Issue number4
    Publication statusPublished - 2011

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