Department of Corporate Finance and Economics, Faculty of Engineering Economics and Management, Riga Technical University, Kalnciema 6, LV-1048 Riga, Latvia
Department of Finance Engineering, Faculty of Business Management, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223 Vilnius, Lithuania
Department of Corporate Finance and Economics, Faculty of Engineering Economics and Management, Riga Technical University, Kalnciema 6, LV-1048 Riga, Latvia
The paper aims to improve the methodology of measuring efficiency of Latvian banks. Efficiency scores were calculated with application of non-parametric frontier technique Data Envelopment Analysis (DEA). Input-oriented DEA model under Variable Returns to Scale (VRS) assumption was used. Potential model variables were selected based on the intermediation and profitability approach. Fourteen alternative models with different inputs-outputs combinations were developed for the research purposes. To substantiate the variables selection for DEA model the received data was processed, using such methods, as correlation analysis, linear regression analysis, analysis of mean values, and two-samples Kolmogorov-Smirnov test. The research results assisted the authors in providing general recommendations about the variables selection for DEA application in the Latvian banking sector. The present research contributes to the existing analytical data on bank performance in Latvia. The empirical findings provide a background for further studies, in particular, the efficiency of Latvian banks could be analysed in the extended time period.
Titko, J., Stankevičienė, J., & Lāce, N. (2014). Measuring bank efficiency: DEA application. Technological and Economic Development of Economy, 20(4), 739-757. https://doi.org/10.3846/20294913.2014.984255
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