Classification of profitability using DEA and cluster analysis: A transnational comparison of South Asian banks

Parakramaweera Sunil Dharmapala, Piyadasa Edirisuriya

    Research output: Contribution to journalArticleResearchpeer-review

    1 Citation (Scopus)

    Abstract

    We propose a method to classify banks as profit-makers, loss-makers or neither by randomising Thompson-Thrall s linked-cone (LC) profit ratios with assurance-regions (AR) in data envelopment analysis (DEA). Thompson et al. (1995) addressed profitability of banks with the introduction of LC-AR profit ratios. We randomise LC-AR and show that randomised profit ratios uncover more profit-makers than Thompson-Thrall s profit ratios. In an application to banks from four South Asian nations, we demonstrate how to do this classification. Then, using cluster analysis with financial ratios and randomised profit ratios, we strengthen the classification of profit-makers and do a comparative study across nations.
    Original languageEnglish
    Pages (from-to)213 - 240
    Number of pages28
    JournalInternational Journal of Information and Decision Sciences
    Volume7
    Issue number3
    DOIs
    Publication statusPublished - 2015

    Cite this

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    abstract = "We propose a method to classify banks as profit-makers, loss-makers or neither by randomising Thompson-Thrall s linked-cone (LC) profit ratios with assurance-regions (AR) in data envelopment analysis (DEA). Thompson et al. (1995) addressed profitability of banks with the introduction of LC-AR profit ratios. We randomise LC-AR and show that randomised profit ratios uncover more profit-makers than Thompson-Thrall s profit ratios. In an application to banks from four South Asian nations, we demonstrate how to do this classification. Then, using cluster analysis with financial ratios and randomised profit ratios, we strengthen the classification of profit-makers and do a comparative study across nations.",
    author = "Dharmapala, {Parakramaweera Sunil} and Piyadasa Edirisuriya",
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    Classification of profitability using DEA and cluster analysis: A transnational comparison of South Asian banks. / Dharmapala, Parakramaweera Sunil; Edirisuriya, Piyadasa.

    In: International Journal of Information and Decision Sciences, Vol. 7, No. 3, 2015, p. 213 - 240.

    Research output: Contribution to journalArticleResearchpeer-review

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    AU - Edirisuriya, Piyadasa

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    AB - We propose a method to classify banks as profit-makers, loss-makers or neither by randomising Thompson-Thrall s linked-cone (LC) profit ratios with assurance-regions (AR) in data envelopment analysis (DEA). Thompson et al. (1995) addressed profitability of banks with the introduction of LC-AR profit ratios. We randomise LC-AR and show that randomised profit ratios uncover more profit-makers than Thompson-Thrall s profit ratios. In an application to banks from four South Asian nations, we demonstrate how to do this classification. Then, using cluster analysis with financial ratios and randomised profit ratios, we strengthen the classification of profit-makers and do a comparative study across nations.

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    DO - 10.1504/IJIDS.2015.071370

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