Measuring Efficiency by Product Group: Integrating DEA with Activity-Based Accounting in a Large Mideast Bank

Abstract

We built a method for measuring product-specific inefficiency in bank branches to facilitate precise measurement of waste and identify its causes. Our method combines and integrates two separate, widely used models for measuring costs and efficiency performance: activity-based cost accounting (ABC) and data envelopment analysis (DEA). The resulting method for activity-based management provides managers with detailed quantitative performance benchmarks for the specific business activities of their firms or divisions. We used an integrated model to create a branch profile of a large 250-branch Mideast bank that measures inefficiency separately for customer services and transactions.

Financial performance and customer service: An examination using activity-based costing of 38 international airlines

“…It makes no sense, for example to compare a large international carrier such as Lufthansa with a small regional airline. To this end Kantor and Maital (1999) conducted a cluster analysis of airlines that involved dividing them into groups that have a high degree of internally homogeneous. We use the grouping developed in our applications of DEA, of financial statement analysis, and of ABC to international airlines.…”

Bank branches efficiency under management and regulatory constraints

“…They derived lessons for managerial utilization in aspects such as input/outputs sets, and incentives concerned with managerial control systems. Kantor and Maital (1999) build a method to measure product-specific inefficiency in bank branches for facilitating a precise measurement of waste, and identify its causes. The model measures inefficiency both for customer services and transactions in a Middle Eastern bank.…”

Assessing Bank and Bank Branch Performance

“…Athanassopoulos (1998) conducted a performance assessment of 580 branches of a commercial bank in UK using cost efficiency, then a new dimension in bank branch performance. Kantor and Maital (1999) integrated an Activity-Based Cost accounting model and a CCR DEA model to measure inefficiency separately for customer services and transactions in 250 Mideast bank branches. Camanho and Dyson (1999) estimated operational efficiencies of 168 branches of a large bank in Portugal.…”