Measuring performance improvement of Taiwanese commercial banks under uncertainty

Chiang Kao, Shiang Tai Liu

Research output: Contribution to journalArticle

16 Citations (Scopus)

Abstract

In order to enable domestic commercial banks to be more competitive globally, the Taiwanese government has twice attempted to financially restructure them, in 2001 and 2004. Different from other studies which use deterministic analyses to measure changes in performance between two periods, this paper adopts probabilistic analysis to take the uncertainty related to certain factors into account. Data from six years, from 2005 to 2010, are divided into two periods, 2005-2007 and 2008-2010, to calculate the global Malmquist productivity index (MPI) as a measure of the change in performance. By assuming beta distributions for the data, a Monte Carlo simulation is conducted to find the distribution of the MPI. The results show that, in general, the performance of the commercial banks has indeed improved. While conventional deterministic analyses may mislead top managers and make them overconfident about results that are actually uncertain, probabilistic analysis can produce more reliable information that can thus lead to better decisions.

Original languageEnglish
Pages (from-to)755-764
Number of pages10
JournalEuropean Journal of Operational Research
Volume235
Issue number3
DOIs
Publication statusPublished - 2014 Jun 16

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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