Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis

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Standard

Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis. / Asmild, Mette; Zhu, Minyan.

I: European Journal of Operational Research, Bind 251, Nr. 3, 2016, s. 999-1015.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Asmild, M & Zhu, M 2016, 'Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis', European Journal of Operational Research, bind 251, nr. 3, s. 999-1015. https://doi.org/10.1016/j.ejor.2015.12.021

APA

Asmild, M., & Zhu, M. (2016). Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis. European Journal of Operational Research, 251(3), 999-1015. https://doi.org/10.1016/j.ejor.2015.12.021

Vancouver

Asmild M, Zhu M. Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis. European Journal of Operational Research. 2016;251(3):999-1015. https://doi.org/10.1016/j.ejor.2015.12.021

Author

Asmild, Mette ; Zhu, Minyan. / Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis. I: European Journal of Operational Research. 2016 ; Bind 251, Nr. 3. s. 999-1015.

Bibtex

@article{0f80dd7a0c1d4e6fa1443c5f2da54090,
title = "Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis",
abstract = "We propose a method for bank efficiency assessment, based on weight restricted DEA, that limits banks{\textquoteright} abilities to use extreme weights, corresponding to extreme judgements of the risk adjusted prices on funding sources and assets. Based on a data set comprising the largest European banks during the financial crisis, we illustrate the impact of the proposed weight restrictions in two different efficiency models; one related to banks{\textquoteright} funding mix and one related to their asset mix. The results show that using a more balanced set of weights tend to reduce the estimated efficiency scores more for those banks which were bailed out during the crisis, which confirms the potential bias within standard DEA that does not control for extreme weights applied by highly risky banks. We discuss the use of the proposed method as a regulatory tool to constrain discretion when complying with regulatory capital benchmarks such as the Basel regulatory capital ratios.",
author = "Mette Asmild and Minyan Zhu",
year = "2016",
doi = "10.1016/j.ejor.2015.12.021",
language = "English",
volume = "251",
pages = "999--1015",
journal = "European Journal of Operational Research",
issn = "0377-2217",
publisher = "Elsevier",
number = "3",

}

RIS

TY - JOUR

T1 - Controlling for the use of extreme weights in bank efficiency assessments during the financial crisis

AU - Asmild, Mette

AU - Zhu, Minyan

PY - 2016

Y1 - 2016

N2 - We propose a method for bank efficiency assessment, based on weight restricted DEA, that limits banks’ abilities to use extreme weights, corresponding to extreme judgements of the risk adjusted prices on funding sources and assets. Based on a data set comprising the largest European banks during the financial crisis, we illustrate the impact of the proposed weight restrictions in two different efficiency models; one related to banks’ funding mix and one related to their asset mix. The results show that using a more balanced set of weights tend to reduce the estimated efficiency scores more for those banks which were bailed out during the crisis, which confirms the potential bias within standard DEA that does not control for extreme weights applied by highly risky banks. We discuss the use of the proposed method as a regulatory tool to constrain discretion when complying with regulatory capital benchmarks such as the Basel regulatory capital ratios.

AB - We propose a method for bank efficiency assessment, based on weight restricted DEA, that limits banks’ abilities to use extreme weights, corresponding to extreme judgements of the risk adjusted prices on funding sources and assets. Based on a data set comprising the largest European banks during the financial crisis, we illustrate the impact of the proposed weight restrictions in two different efficiency models; one related to banks’ funding mix and one related to their asset mix. The results show that using a more balanced set of weights tend to reduce the estimated efficiency scores more for those banks which were bailed out during the crisis, which confirms the potential bias within standard DEA that does not control for extreme weights applied by highly risky banks. We discuss the use of the proposed method as a regulatory tool to constrain discretion when complying with regulatory capital benchmarks such as the Basel regulatory capital ratios.

U2 - 10.1016/j.ejor.2015.12.021

DO - 10.1016/j.ejor.2015.12.021

M3 - Journal article

VL - 251

SP - 999

EP - 1015

JO - European Journal of Operational Research

JF - European Journal of Operational Research

SN - 0377-2217

IS - 3

ER -

ID: 166280142