This study examines the efficiency of the Japanese banking system utilising the relatively new, non-parametric, Slacks-Based Measure (SBM) technique by Tone (2001). This technique differs from the frequently used Banker, Charnes and Cooper (1984) Data Envelopment Analysis model in that it utilises information concerning slacks which do not feature in the latter's primal programme. In addition, we also extend the comparative bank modelling methodology literature by utilising both the Intermediation and Production approaches, together with a third methodology, the Profit / Revenue-based approach, based on a preferred methodology proposed in Berger and Mester (2003). We find that, across the three methodologies, there are marked differences in: mean efficiency scores; the dispersion of efficiency scores; and the ranking of banks and bank sectors. Hence, the results demonstrate a very high degree of modelling dependence, which, we argue, has important implications in the context of policy responses.
• This is a working paper.
ABSTRACT:In one of the first stand-alone studies covering the whole of the Indonesian Under the SORM SBM model, however, large banks' performance is not significantly different from that of the medium-sized banks when equity capital is used as the risk control variable, although the medium-sized banks do out-perform small banks.Moreover, when loan loss provisions are used as the risk control variable, mediumsized banks are shown to significantly out-perform both large and small banks, with the large banks being the least efficient.JEL Classification: C23; C52; G21
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