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Economic Modelling 32 (2013) 225 232

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Economic Modelling
journal homepage: www . elsevier . com/locate/ecmod
The analysis of bank business performance and market riskpplying !u""y #E
$u%&huan &hen
a
' $ung%(o &hiu
b'
' &hin%)ei (uang
c
' &hien (eng Tu
d
1 #ept* of !inance' &hihlee +nstitute of Technology' Tai,an' -.&
2 #ept* of Economics' /oocho, 0ni1ersity' Tai,an' -.&
3 #ept* of 2usiness and Entrepreneurial Management' 3ainan 0ni1ersity' Tai,an' -.&
4 #ept* of !inance' 5ational 3aohsiung 0ni1ersity of pplied /ciences' Tai,an' -.&
a r t i c l e i n f o
rticle history6
ccepted 5 !ebruary 2013
3ey,ords6
!u""y #E
7alue at risk
(istorical simulation
2ank efficiency
a b s t r
a c t
+n the fast
changing
financial
circumsta
nces of
no,adays
' in
a1oiding
the crisis
of closing
do,n'
financial
in%
stitutions
are
concerned about the efficiency and risk strictly in the
meantime* Therefore' efficiency and risk management
are goals for a financial institution administrator* #ata
En1elopment nalysis (#E) is a non%parameter
approach to e1aluate the performance of #M08s
efficiency and the 1ariables used in the #E are all
accurate 1alues* (o,e1er' ,hen the input or output
1ariables are fu""y' the performance of #M0s must
proceed by the !u""y%#E* .n the basis of risk
uncertainty' this research plans to apply the e9panding
model of !u""y /lack%2ased Measurement (!u""y
/2M)* The efficiency scores estimated by !u""y /2M
model are subordinate to functional form' ,hich
pro1ides efficiency 1alue region in different de%grees of
confidence' conforms to the characteristic of risk
anticipation' and estimates the management
achie1ement of Tai,an banking under market risk*
: 2013 Else1ier 2*7*
ll rights reser1ed*
. !ntroduction
s financial institutions around the ,orld
become more internationali"ed and globali"ed' the
trading acti1ities of the financial industry continue
to rise* The market structure is further complicated
due to the di1ersity and inno1ati1eness of products
a1ailable* There%fore' the risk of in1estment for
fi
na
nc
ia
l
in
sti
tu
ti
o
ns
like,ise in%creases* )ith
such changes in the
economic state' banks no
longer ha1e the sole role of
being the purely monetary
intermediary* They must
no, de1elop a ,hole range
of in1estment channels in
order to sur1i1e under such
conditions* (o,e1er'
bearing the ob;ecti1e of
profit%making in mind'
banks ,ill naturally
increase their in1est%
ments in high%risk
products or increase
le1eraged trading'
,hich means that the
high potential profits
mask the high risks
in1ol1ed and increase
the probability of a
bank8s bankruptcy due
to poor man%agement*
!or this reason' more
attention must be paid
to the high risks
attached to the high
potential profits* The
topic of -isk d;usted
<erformance
Measurement has' in
recent years' gained
increasing a,areness and has become more ,idely
discussed as people place more importance on risk
management*
!rom the perspecti1e of efficiency
measurement' #ata En1elop%ment nalysis (#E)
takes into consideration both inputs and
&orresponding author at6 #ept* of Economics' /oocho,
0ni1ersity' 5o* 5=' /ec* 1' 3uei%yang' Taipei' 100' Tai,an'
-.&*
E%mail addresses6 echiu>scu*edu*t, ($*%(* &hiu)'
da1y=4112=>yahoo*com*t, (&*%)* (uang)'
heng>cc*kuas*edu*t, (&*(* Tu)*
02=4%???3@A see front matter : 2013
Else1ier 2*7* ll rights reser1ed*
http6@@d9*doi*org@10*101=@;*econmod*2013*02*0
0B
o
ut
p
ut
s*
T
he
m
at
he
m
at
ic
al
m
et
h
o
d
th
er
ef
or
e
pr
o
1i
de
s
a
fair measure%ment of
efficiency* /ince this
analytical model ,as first
proposed' it has been ,idely
applied in a ,hole range of
industries* Most studies to
date on bank efficiency ha1e
focused mainly upon the
economies of scale and
scope ( 2erger and
(umphrey' 1??1C 2erger et
al*' 1?BDC (unter and
Timme' 1?B=C Mcllister
and McManus' 1??3)' total
pro%ducti1ity ( ly et al*'
1??0C !a1ero and <api'
1??5C !ukuyama et al*'
1???C Erabo,ski et al*'
1??3C /chaffnit et al*' 1??DC
Faim' 1??5)' and the
efficiency effect ( 2arr et
al*' 1??4C &asu and
Molyneu9' 2003C
&ebenoyan et al*' 1??3C
&hang' 1???C #e$oung and
(asan' 1??BC Elyasiani et
al*' 1??4)* The fact that
increasing importance is
gradually being placed on
risk management
means that more
attention is also gi1en
to #E models that
include risk in their
eGuations* There are
t,o issues concerning
banks8 efficiency and
risk* .ne issue treats
risk as e9ogenous in
order to analy"e
efficiency effects (
taullah et al*' 2004C
2arr et al*' 1??4C
2erger and #e$oung'
1??DC &hang and
&hiu' 200=C &ebenoyan
et al*' 1??3C Elyasiani
et al*' 1??4C <astor'
2002)* The abo1e
results sho, that the
efficiency le1el is
significantly correlated
,ith the risk indicators*
The other issue treats
risk as en%dogenous in
order to analy"e banks8
efficiency ( ltunbas et
al*' 2000C &hang'
1???C &hiu and &hen'
200BC #rake and (all'
2003C Eirardone et al*'
2004C (ughes' 1???C
(ughes et al*' 2001C
Mester' 1??=C <astor'
1???)* (o,e1er' the
ma;ority of literatures
adopt the o1erdue loan
ratio as the substitute
1ariable for risks'
,hich does not reflect
the characteristic of
uncertainty that risks
display*
-isk is defined as
the presence of the
characteristic
uncertainty' and the
degree of risk 1aries
,ith the asset 1alue
fluctuation and the
manager8s attitude
to,ard risk* -isk may
therefore either bring
profit or loss to the
asset 1alue* The basic
function of capital in
this
22= $*%&* &hen et al* @ Economic Modelling 32 (2013) 225232
conte9t is to help bear the possible loss
incurred by taking risks* The appropriate
pro1ision of capital is therefore key to a
stable fi%nancial structure' ,hich can help
pre1ent a situation of an inability to make
payments* +n 2002' the 2asel &ommittee
on 2anking /uper1ision (2&2/)
proposed the 5e, 2asel &apital ccord
(2asel ++)' ,hich sets out guidelines for
international banks in terms of taking
risks' and therefore' to pre1ent financial
crises* +n the section on minimum capital
reGuirement outlined in 2asel ++' the
internal rating uses 7alue at -isk (7a-) as
the basis to estimate the ma9i%mum
potential loss of the portfolio selection* +n
simple terms' the 7a- "uses a single 1alue
to represent the ma9imum potential loss
of an in1estment portfolio during a period
of time' ,ith a certain confidence le1el#*
(ence' 7a- is a prediction inter1al that
pro1ides different estimates according to
the different confidence inter1als' and
therefore takes into account the
characteristic of uncertainty that risks
displays*
)hile 7a- is ,idely used to represent
the le1el of risks entailed' the input and
output 1alues of the original #E models
are considered crisp 1alues* This is a
reoccurring issue encountered ,hen using
7a- to esti%mate the efficiency 1alues of
banks* &onsidering both domestic and
for%eign literatures' there ha1e been none
that ha1e combined these t,o issues and
pro1ided an analytical discussion on the
topic* Therefore' this paper seeks to
combine the /lack%2ased Measure of
Efficiency (/2M) as proposed by Tone
(2001)' ,ith the !u""y Measure Theory'
and de1elops the non%radial !u""y /lack%
2ased Measure of Efficiency model
(!u""y%/2M)*
$. %iterature review
#E ,as a method first proposed by
&harnes et al* (1?DB)C then 2anker et al*
(1?B4) de1eloped the method for 1ariable
returns to scale' called the 2&& model*
2oth the &&- and 2&& models
considered the ,eighting of inputs and
outputs' and used linear programming to
estimate efficiency 1alues* Tone (2001)
proposed the /lack%2ased Measure of
Efficiency (/2M)* This model adopts a
non%radial method of estimation' ,hile
considering the input and output slacks*
There%fore' ,hen the efficiency 1alue of a
#ecision Making 0nit (#M0) eGuals 1'
the #M0 displays no slacks in either its
input or output*
#E is ,idely used to
estimate the efficiency 1alues
of 1arious orga%ni"ations and
industries' and the /2M
model sol1es the issue
presented in efficiency
ranking* (o,e1er' these
traditional #E models
assume crisp input and
output 1alues* +f these 1alues
are fu""y numbers' the tra%
ditional #E models cannot
accurately measure the
efficiency 1alues* !or this
reason' scholars ( &ooper et
al*' 1???C #espotis and
/mirlis' 2002C Euo and
Tanaka' 2001C Hahanshahloo
et al*' 2004C 3ao and Iiu'
2000) de1eloped the !u""y%
#E model' ,hich has the
fu""y measure characteristic*
!u""y%#E ,as originally
proposed by /engupta
(1??2)' in ,hich /engupta
proposed the fu""y goal%
oriented and constraint%based
techniGue based on
Fimmermann8s (1?D=)
method* This pro1ided the
results of !u""y%#E'
although the techniGue is
limit%ed to analy"ing
efficiency ,ith multiple
inputs and a single output*
3ao and Iiu (2000a'b)
argued that ,hen fu""y data
e9ists or there is missing
data' it is necessary to adopt
the fu""y measurement
concept and the
The 2asel &apital ccord
,as created due to the
increasing impor%tance
placed on risk management*
The 7a- approach detailed
in the 2asel &apital ccord
has been' so far' the most
popular method employed in
risk management* 2eder
(1??5) used the (istorical
/im%ulation and the Monte
&arlo /imulation methods to
estimate the 7a- of three
simulated in1estment
portfolios* -esearch carried
out by (endricks (1??=)
concluded that there is no
one particular risk 1alu%ation
model that ,as more
superior to other models
under e1ery set of
performance criteria*
le9ander and Ieigh (1??D)
belie1ed that be%cause the
(istorical /imulation
method tends to use data
collected o1er a fe, years to
e1aluate the market 1ariants
and the distribution of profits
and losses' it ,as therefore a
better model as no
distribution hypothesis is
reGuired to estimate the 7a-*
Hackson et al* (1??D) stressed
that there can be significant
differences in 7a- 1alues
due to the different types of
portfolios' and that the
simulation method is able to
pro1ide more precise tail
probabilities than the
parameter formula* Iooking
at all the literatures
mentioned and their
empirical results' it is e1ident
that the use of 7a- models to
measure adeGuacy for market
risk is 1ery popular*
)hen e1aluating risk
characteristics and
estimating efficiencies' it is
suitable to employ the
!u""y%#E model ,here the
input and out%put are non%
particular 1alues* The abo1e
method suggested by this re%
search paper is different from
the traditional #E models
proposed in past literatures*
nother uniGue aspect of this
paper is to ha1e de1el%oped
the !u""y%#E model into
the !u""y%/2M model'
,hich is also different from
the current !u""y%2&& and
!u""y%&&- models* To sum%mari"e' this
research considers the operational risk of
banks and uses the 7a- 1alues as fu""y
numbers to estimate the business perfor%
mance of banks in Tai,an*
&. 'esearch methodolog(
Tone (2001) proposed that /lack%
2ased Measure of Efficiency model
utili"es non%radial estimation method* +t
also takes the slacks of in1est%ment and
production items into consideration* #ue
to the employment of the non%radial
method to estimate the efficiency 1alue'
the issues such as infeasible ,ould not
occur* Thus' this study tends
to base on the /2M model'
utili"ing !u""y #E ( 3ao
and Iiu' 2000) to further
de1el%op !u""y /2M based
on the concepts of fu""y
numbers* +n the follo,ing'
the /2M model ,ill be first
illustrated' then the
deri1ation of !u""y /2M*
3*1* /lack%based measure of
efficiency
Tone (2001) proposed
the /2M model ,hich is in a
manner of a non%ray
efficiency of the estimated
1alue' and it ,ill not incur a
problem that cannot be
estimated* ssume there are
n #M0s' m inputs' and s
outputs* The production
possibility set is defined as
<JK(9'y)L 9M'y
$'0N in ,hich
MJ(9
i;
)-
mOn
is the input
matri9 and $J(y
r;
)-
sOn
is
the output matri9* The inde9

;
for the #M0
;
is from
(9
0
'y
0
) so as to a1erage
distances)9 * y+< )9
0
*
y
0
+* The /2M is as follo,s*
E9tension <rinciple as
proposed by Fadeh
(1?=5) to transform the
!u""y%#E model into a
traditional #E model
,ith parameters of the
le1el * /ubseGuently'
/aati et al* (2002) and
Iert,orasirikul et al*
(2003) proposed
respecti1ely the !u""y%
&&- model ,ith
asymmetric triangular
fu""y numbers' and the
!u""y%2&& model that
uses probabil%ity to
conduct analysis* They
used a%cut to transform
the !u""y%#E model
into a linear structure
model* 3ao and Iiu
(2004) published a re%
search paper' ,hich ,as
the first research based on
financial institu%tions in
Tai,an' ,ith research
using the !u""y%#E
model to e1aluate the
efficiency 1alues of those
banks* 0nfortunately' this
paper did not take into
account the risks faced by
the banks' and in the e1er
changing market
conditions' this ,as a
limitation*
min
; *1 *2 *,*n
s:t:
1
m
i; .
-
m
i.
1
9
i0
;
.
1
s
-r;
.
s
r.1
y
r0
n
;
-
k9k
k.1
n
;
-
kyk
k.1
9
;
9
0
and
y
;
y
0
y
;
0*
k
0:
$*%&* &hen et al* @ Economic Modelling 32 (2013) 225232 22D
3*2* !u""y slack%based measure of
efficiency (!u""y%/2M)
/ /
ssuming that the M
i;
and $
i;
are
inputs and outputs characteri"ed by
uncertainty of the ;th #M0 respecti1ely'
and these can be repre%
sented by membership functions /
M
set* +n the fu""y en1ironment' the !u""y%
/2M formula can therefore be ,ritten
as6
Min
/
k .
G0
1
m
0
1 M
/
ik
-
/
i
m
i
.
1
s
s:t:
1
.
-
/r
2
1
$
/
rk
2
s r.1
n
0
i . 1* ,*
m* G M
/
ik .
-
M
/
i;;
3
2 /i
;.1
n
G $
/
rk .
-
/$ r;;
3
0/r
2
r . 1* ,* s*
n ;.1
-
;
3
. G
;.1
;
3
40* ; . 1* ,* n* /i
0
40* i . 1*
,* m* /r
2
40* r . 1* ,* s* G 5 0:
)
+n formula (2) all inputs and outputs
are assumed as fu""y data* +f any input or
output number is an e9act 1alue' the
e9act data can be e9pressed as
degenerated membership functions*
Therefore' only
one 1alue is present in the range* )e then make / 9
/ /
the support of 9;i and y;r ' ,here the de
of elements ,ith membership functions larger
than 0* The % cut of
/ / fi
9
;i
and y
;r
is de ned as6
M

;
i
n
9;i

/

M
/
;i
M/ ;i9 ;i
o
*
.
$ ;r
n
y;r /$/ ;r $/ y;r
o
*
. ;r
The (M
;i
)

and ($
;r
)

here are a crisp


set* Therefore ,hen using a % cut' input
and output can both be e9pressed as the
crisp inter1als of 1arious le1el
standards* The set of le1el standards
defined in the formula abo1e can be
e9pressed as6
M

;
i
n
9;i
/

M
/ ;i
M/ 9;i
oh
.
;i
.
h

min9;i
n
9;i
/

M
/
;i


9
;i
$

;r
n
y;r
/

$
/
;r


y ;r
o h

.
j
;
r
h
m
in
y;r
n
y;r
/

$
/ ;r

$/ y
. ;r
)4+
+n the situation of
1arious le1els for K(M
;i
)

L0
b 1N and K($
;r
)

L 0 b
1N' the !u""y%#E model
can be con1erted into the
&risp%#E model*
ccording to the E9tension
<rinciple ( $ager' 1?B1C
Fadeh' 1?=5C Fimmerman'
1?D=)' the efficiency
membership function for
the ;th #M0 can be defined as6

/
E
k
"
sup min
n
/M
;i 9
;i
* /
;r
)
+
. 9*y
+n this case' E
k
(9'y) is
the efficiency 1alue
calculated using the tra%
ditional /2M model under a
set of inputs and outputs*
ccording to formula (5) '
for any efficiency 1alue ,ith
the combination 9
;i
' y
;r
of "'
its minimum degree of
membership eGuals to the
membership of /E
k
on point
"*
ccording to the <areto%
optimal solution' the lo,er
and upper bounds of a % cut
under /E
k can be con1erted
into a traditional one%step
programming model in order
to obtain the solution*
Min
k

G
0
1
m
/
i
0
I 1
9ik

I
X
)
.
) +
)
+
m
i
.
1 s:t: 1
G
0
1 yrk
0
1 s /r 2
.
2
X
) +
r
.
1

n
9i
;
0
;3

I

/i
0
I
G
9ik
.
2

)
9
i
k
2

)
.
1* ,*
m*
) X + +
;.1*6k
n 3
0 k30/r 2
0
G
yrk


.
yr;
I
;
2

)
y
r .
1* ,*
s*
) X

+
n
;.1*6
k
X
;
3
. G
;.1
/r
20
40* r . 1* ,* s* G 5 0
;
3
40* ; . 1* ,* n* )
/i
0
+
I
40*
i . 1* ,*
m*
)=a+
1
m 0
Min)k+
I
. G0
X
)/i
0
+
1)9ik
+
0
m
s:t:
1
i
.
1 I
1 s /r 2 1 yrk I
. 2
X
) +
r.1
G
9

.
n

I;
3
2

)
9

0

k
3
2
/
i
0
0
i
.
1* ,* m*
+
X
+
) +
;.
1*
6k
3
G
yr
k
.
n
y r;
0

;
2

)
y
Ik30/r 2
I
r
.
1* ,* s*
)
X
n
;.1*
6k
X
;
3
. G
;
.
1
/r
2I
40* r . 1* ,* s* G 5 0: ;
3
40* ; . 1* ,* n* )/i
0
+
0
40*
i . 1* ,*
m*
)=b+
/imilarly' this model has
the limitation of the ma9imum relati1e
efficiency 1alue being 1' ,hich makes it
difficult for the ranking pro%cess because
the efficiency 1alues are e9pressed as
inter1als* !or this reason' this research
further de1elops the !u""y /lack%2ased
Measure of /uper%Efficiency model*
3*3* !u""y slack%based measure of super%
efficiency in #E
ndersen and <etersen (1??3)
proposed the supper%efficiency model to
sol1e the ranking problem* ssuming
again that a set of #M0s8 input and
output display the characteristic of
uncertainty' ,e use /M
i;
and /$
i;
to
denote the input and output of the ;th
#M0 respec%ti1ely' and these can be
represented as membership functions /M
i; and /$
i; in the con1e9
fu""y set* +n the fu""y
en1ironment' the !u""y
/uper /2M formula can
therefore be ,ritten as6
1
m
/ k .
Min X
3
i
1M
/

ik
m
s i.
1
s:t:
1 X
3
r
1$
/

rk
.
s r.1
n
3
i
X
M/ i;;
3
i . 1* ,*
;.1*6
k
)D+
n
3
r
X
$/ r;;
3
r . 1* ,*
s*
;.1*6
k
n
3
.

G
X
;
;.1*6k

0
*
;
3 /
3
/

; . 1* ,* n* k* 9 iGM ik* i . 1* ,* m* y r G$ rk
y
3
r
0* r . 1* ,* s* G
5 0:
2ased on the de fi nitions
(4) and (5)' the upper and
lo,er bounds of a % cut
under /E
k can be
determined* The t,o%step
mathematical
22B $*%&* &hen et al* @ Economic Modelling 32 (2013) 225232
programming model can be transformed
into a traditional one%step programming
model using the <areto%optimal solution*
Therefore' the !u""y /uper /2M model
can be transformed into6


M
i
n
m I

I
X 9 3i 1 Mik
. )
i
.
1
s
m
s
:
t
: 1 X
3
r
0
1
$rk


0
.
s
r.1 ) +
3
i
I
4
X
)Mik+
I
;
3
i . 1* ,* m*
;.1*6k
3
r
0
7
X
)$rk+
0
;
3
r . 1*
s*
y
n 3
;.1*
6k
.

G
X
;
;.1*6k
3
i
I
4G )
;
3
40* ; . 1* ,* n* 6k*
1* ,* m* y 3r
0 7G $rk 0
.
) +
3
r

0
40* r . 1* ,* s* G 5 0


1
m 0

0
k
M
i
n X
3
i 1 Mik
.
s
m
i.1 )
s
:
t
: 1 X
3
r
I
1
$rk

I
.
s
r.1
n
)
3
i
0
4
X
)Mik+
0
;
3
i . 1* ,*
m*
;.1*
6k
n
3
r
I
7
X
)$rk+
I
;
3
r . 1* ,*
s*
y
n 3
;.1*
6k
.

G
X
;
;.1*6k
1* ,* n* 6k* 9
;340* ;
.
i . 1* ,*
m*
3
r
I
7G)
3
r

I
40* r . 1* ,* s*
The relati1e efficiency 1alues calculated using EGs*
fer from the crisp 1alues
calculated by the traditional
#E method in that they are
fu""y numbers* +t is therefore
difficult to rank the #M0s
being e1aluated according to
their efficiency 1alues*
!urthermore' be%cause the
efficiency 1alues in this
research are the upper and
lo,er bounds of the relati1e
efficiency 1alues calculated
under 1arious le1els' the
membership functions of the
efficiency 1alues are
unkno,n* ccording to &hen
and 3lein (1??D)' in the
situation of unkno,n mem%
bership functions the inter1al
1alues obtained by using %
cut can be used in the rea
Measurement Method to
rank the fu""y numbers* To
this end' make h the
ma9imum height for the
membership function such
that kJ1','n* ssume that h
is di1ided into m inter1als
,ith m approaching
infiniti1e' so that
i
Jih@m'i
J0','m* The follo,ing
inde9 can then be used to
rank the fu""y numbers (
&hen and 3lein' 1??DC 3ao
and Iiu' 2000)6
m
X h
)Ek+
0
i
+)/ E
k
/*
-+ .
i.0
m
h
E
k 0i 0c
i
0
m

h
X

) X
i.
0
i
.
0
+n this case'
c
.
min
i
*k
n
E
k
)

+
the fu""y ranking inde9
+)/E
k
/* -+' the better the
rank for the #M0*
8. 9mpirical results
4*1* #ata source and data
handling
This research uses 30
banks in Tai,an recorded in
200B as the sample and uses
trigonometry as the basis for
calculating the upper and
lo,er bound inter1als for
each 1alue of * The source
of data and the process for
handling the data are detailed
as follo,s*
(1) /ource of data used
to calculate 7a-*
7a- is a Guantifiable
measurement for
market risks* The
2ank for
+nternational
/ettlements (2+/)
reGuires banks to
calculate 7a- on a
daily basis at a ??P
confidence le1el' a
ten%day hold%ing
period' ,ith the
minimum sample
period of one year*
The main ad1antage
of 7a- is that a
straightfor,ard
numeric 1alue
captures the concept
of risk and allo,s
risks to be easily
comparable*
Market risk refers to
the possible loss
caused by irregular
fluc%tuations of the
financial asset 1alue
during a specific
period of time' as a
result of market price
changes due to the
interest rate' foreign
e9change rate' eGuity
security' commodity
prices and so on*
Market risk is
broadly categori"ed
into interest rate risk'
eGuity risk' foreign
e9change risk and
commodity risk* #ue
to the scarcity of
detailed data' this
research only takes
into account eGuity
risk and foreign
e9change risk* The
annual 7a- of each
bank calculated using
(istorical /imulation
is sho,n in Table 1 *
(2) +nput and output 1ariables in
efficiency estimation*
The illustrations of the production
process of banking are unclear in
the reference articles* The
definitions of the production
process of banking can be found
in the production approach and
the in%termediary approach
proposed by Miller and 5oulas
(1??=)* +n the production
approach' banks are considered
tools utili"ing capital' labor and
facility to generate and pro1ide
deposits and loans ( 2erger et al*'
1?BDC !errier and Io1ell' 1??0C
<arkan' 1?BD )C on the other hand'
intermediary approach considers
that the functions of banks lie in
pro1iding the ser1ice of financial
agentsC that is' banks employ
labors and in1est resources in
order to absorb sa1ings and funds'
also pro1iding money to those
,ho need it and transferring it to
capital ,ith interests* This
research emphasi"es estimating
efficiencies after risks are taken
into consideration' and treats risks
as input 1ariables* !ur%thermore'
using the
+ntermediation
pproach( 2erger
and (umphrey'
1??1C (ughes and
Mester' 1??3C
3aparakis et al*'
1??4C /iems' 1??2C
$eh' 1??=C $ue'
1??2)' three output
1ariables and four
input 1ariables ,ere
included* The output
1ariables in%clude
total loans' total
in1estments' and
handling fees and
com%missions* The
input 1ariables
include the number
of staff' total
deposits' total fi9ed
assets' and 7a-
1alues* .f these
1ariables' the 7a-
1alues are inter1al%
1alued fu""y
numbers' and the
7a- and original risk
of holdings are
triangular
membership
functions*
4*2* Empirical results
This research firstly
estimates the 7a- 1alues of
banks in Tai,an' and uses
the !u""y%/2M model to
estimate the efficiency 1alues
of the sample banks* The
results obtained differ from
that calculated by traditional
#E models as the
efficiency 1alues calculated
using the !u""y%/M2 are
membership functions*
+n this research' the 7a-
is a triangular membership
function that uses the a % cut
concept to estimate the upper
and lo,er bounds of the
efficiency 1alues* The
assumption 1alues of a % cut
used are 0' 0*3' 0*5' 0*D and
1* )hen the a % cut 1alue
eGuals 0' it means there is
high risk 1olatility and the
change is that the 7a- lies
,ithin a ??P confidence
inter1al* Theoretically' the
difference bet,een the upper
and lo,er bounds of the
efficiency 1alues in this
situation
$*%&* &hen et al* @ Economic Modelling 32 (2013) 225232 22?
:able
#ata for the 30 commercial banks in Tai,an in 200B*
#M0 (+) (+) (+)
/taff Total fi9ed assets
Total deposits
(5T
(perso
n) (5T dollar) dollar)
(.) (.) (.)
Total loans
(5T Total in1estments (andling fees and
dollar) (5T dollar) commissions (5T dollar)
1 =35D 1'32='533'000 1'050'1?0'000 (D0'52?'41=*?55C DB'B0D'3=?*000C ?D4'?43'000 243'=53'=3='000 24'?=4'000
B4'?3?'25=*??B)
2 D0BD 1'D10'D0D'000 1'2BD'330'000 (10='B5B'24D*144C 11?'4DB'1?B*000C 1'152'0=0'000 34D'215'DBD'000 35'0=B'000
12B'B1B'105*25B)
3 D054 1'D1?'2?D'000 1'31B'3D1'000 (125'5D2'15B*135C 140'23D'214*000C 1'114'3=='000 33?'244'51D'000 3D'=43'000
151'133'D4=*121)
4 =1? 302'?=1'000 2?'B34'000 (3='=15'?=0*0=DC 40'5??'5=?*000C DB'D5B'000 11D'=15'01?'000 ='013'000
43'53='??D*B03)
5 5103 1'?51'405'000 1'2B?'2?0'000 (11?'20B'04?*32BC 132'442'=3D*000C 1'303'503'000 2=2'D??'1=0'000 3?'554'000
142'214'3?D*413)
= 4554 4B='452'000 3?0'?1B'000 (=0'14B'42=*D24C =D'45?'310*000C 30?'=43'000 1=2'40B'12?'000 2?'?25'000
D2'441'=32*2?D)
D 205D 2=3'525'000 240'B?4'000 (2'=?0'D4=*14?C 3'00='?0B*000C 201'B32'000 15'4B?'524'000 11'21D'000
3'24?'=40*=02)
B B==0 1'4?5'24='000 1'100'243'000 (140'B33'B24*3=5C 12B'BB0'=42*000C B3B'4D3'000 4=4'253'0B3'000 132'530'000
1=='44D'B0B*32B)
? 5?10 1'2BD'3=D'000 1'020'41='000 (=3'?20'=2?*B?DC D1'3B='010*000C B0?'5BD'000 3B3'2?0'422'000 3D'B3D'000
D='?3D'3=2*0??)
1
0 =25? 1'144'145'000 B35'=4D'000 (=4'333'?45*D41C D1'B5D'0?5*000C D52'3B4'000 135'BD1'4B2'000 44'3DD'000
DD'4D0'??3*45B)
1
1 510? 1'12D'B15'000 ?45'3B5'000 (23'13B'413*4BBC 25'B43'D0B*000C BDB'DD0'000 143'B2='345'000 13'244'000
2D'BBD'1BD*B4D)
1
2 BBD 15='B53'000 130'52='000 (1'21B'=10*301C 1'3=2'B54*000C 13='244'000 22'504'?31'000 4'5=2'000
1'4D5'B5=*D2B)
1
3 33BB 3=3'=3D'000 2B='D=B'000 (4'B40'110*110C 5'41='305*000C 1DB'254'000 ??'B?4'=?='000 13'B2='000
5'B=B'=B5*00?)
1
4 4?B= ???'?3?'000 B11'33='000 (1?'D30'B=5*3=2C 22'043'240*000C =2B'204'000 1?0'D43'0D0'000 21'153'000
23'DD3'?D=*241)
1
5 3?5= D?3'?35'000 =21'534'000 (D2'253'1?5*55?C B0'?0?'553*000C 532'B33'000 13D'?BB'5D1'000 2D'54='000
BD'255'243*?2=)
1
= 2B=5 345'B32'000 2D3'=44'000 (1D'05?'1D3*302C 1?'022'4?1*000C 235'411'000 =2'?=D'3D3'000 B'?55'000
20'4=B'053*?50)
1
D D02? ?22'24B'000 D30'1??'000 (2?'130'040*42?C 32'501'22=*000C 51D'1?3'000 B2'B=4'223'000 51'0=4'000
34'?52'B?=*035)
1
B 232D 3=0'?D2'000 2B1'2??'000 (15'0D0'?4B*B11C 1='B0='0D2*000C 210'523'000 33'423'=33'000 11'5?0'000
1B'0BB'254*1BD)
1
? 2==2 314'1D1'000 240'?=1'000 (D'?1B'030*=1DC B'B42'4D?*000C 21B'440'000 15'3B2'44?'000 11'B30'000
?'513'124*33=)
2
0 205D 2B2'35='000 214'DD?'000 (10'455'B=B*B13C 11'=D='?2=*000C =B'B=2'000 4D'2B5'4B3'000 D'405'000
12'=05'004*4==)
2
1 32=4 3B5'D03'000 32?'0B4'000 (1B'D50'44D*44=C 21'0=3'50=*000C 2DB'B53'000 45'B43'1D?'000 11'400'000
22'551'=D5*D3?)
2
2 245? 244'D?D'000 210'3?1'000 (2'04?'D?=*52BC 2'2?4'035*000C 1=4'B1='000 14'130'D03'000 4'05?'000
2'4BD'135*1BB)
2
3 22=D =01'D4B'000 422'033'000 (33'=?2'235*B5DC 3D'=1='B15*000C 32='B=?'000 205'D??'43B'000 15'=D2'000
40'523'2=3*D=B)
2
4 1?D4 250'1?5'000 214'344'000 (D'40='40B*5?1C B'2B0'=55*000C 13='151'000 B'1D='2D?'000 5'B?3'000
B'?2B'=22*1=3)
2
5 ?DD 103'B45'000 ?0'DD2'000 (2'1D='D=1*??2C 2'413'01B*000C B0'?2B'000 4'45?'21D'000 4'B40'000
2'5B2'1==*53D)
2
= 11=D 103'5D5'000 ?3'35?'000 (2'BD3'551*=1=C 3'15B'D?=*000C DD'=50'000 5'0B?'=2?'000 4'=22'000
3'3=D'B02*?33)
2
D BD?2 2'440'D0='000 1'??B'=54'000 (D4'5D0'4B5*?0=C B3'2=='015*000C 1'B23'B?B'000 1D5'13?'D20'000 2='5D?'000
B?'=?D'5D0*=?B)
2
B B21? 3'0BD'2=?'000 2'50?'014'000 (?D'32B'D=3*B05C 10B'D1D'=?0*000C 1'?B1'DB='000 354'0?5'5=B'000 23'412'000
11D'2??'0D4*B42)
2
? 145? 1D1'?34'000 14='151'000 (1'?=B'=?B*?5=C 2'1??'1B2*000C 11?'=32'000 4'52?'515'000 3'215'000
2'3=?'=5D*D52)
3
0 3?B 41'241'000 35'B0B'000 (3'244'0=1*42BC 3'=22'B==*000C 2='?1='000 5'345'?23'000 14='000
3'?03'?51*0?B)
should be the highest* .n
the contrary' ,hen the a %
cut 1alue is set at 1' there
is no risk 1olatility and the
risk of the holdings is
stable*
Therefore'
there should
be no
difference
bet,een the
upper and
lo,er
bounds of
the
efficiency
1alues
,hen the
a % cut
1alue is 1* The use of the
!u""y%/2M model for
estimating efficiency
1alues not only represents
the characteristic of
uncertainty ,ith the upper
and lo,er bounds of the
efficiency
1alues' it
also
presents
the
potential
effect of
risk
1olatility
on
efficiency
1alues by
using
different a
% cut 1alues in the
calculation*
Empirical
results sho,
that' ,hen a %
cut is set at 0'
both the
upper and
lo,er bounds
of the nine
#M0s
(#M03'
15' 1='
1B' 20'
21' 24'
2=' 2?)
being
smaller
than 1*
)hat this
means is
that these
#M0s are in%efficient
#M0s' and ,hile the risk
1ariable affects the
efficiency 1alue' it does
not alter the conclusion
that these #M0s are
inefficient* The upper and
lo,er bounds of the
efficiency 1alues of
#M010' #M01? and
#M022 all e9ceed 1'
,hich
means
that
depending
on the risk
1ariable'
these
three
#M0s
may be
either
inefficient
or efficient
#M0s* +n
terms of
the
difference
bet,een
their
upper and
lo,er
230 $*%&* &hen et al* @ Economic Modelling 32 (2013) 225232
bounds of the efficiency 1alue' the
difference displayed for #M010 is
appro9imately 0*2D=1' for #M01? it is
appro9imately 0*544?' and for #M022
the difference is appro9imately 0*54?2*
The significance of these differences is
that the efficiency 1alues of these #M0s
can be greatly affected by the risk
1ariable* !inally' for the remaining 1B
#M0s' namely #M01' 2' 4' 5' =' D' B' ?'
11' 12' 13' 14' 1D' 23' 25' 2D' 2B and 30'
their upper and lo,er bounds of the
efficiency 1alue are all greater than 1'
meaning they are all efficient #M0s*
)hile the risk 1ariable may affect the
efficiency 1alue' it does not alter the con%
clusion that these #M0s are efficient*
!rom the empirical
research results sho,n in
Table 2' it can be seen that
apart from #M01' 4' 5' =' B
and 30' the difference
bet,een the upper and lo,er
bounds of the efficiency
1alue for all other #M0s are
the biggest ,hen a % cut is set
at 0* &on1ersely' the
estimated effi%ciency 1alues
are fi9ed ,hen a % cut is
eGual to 1' such that the
1alues for the upper and
lo,er bounds of efficiency
are the same* This find%ing
conforms to the model8s
hypothesis* !urthermore'
,hen a % cut is set at 0*5' the
upper and lo,er bounds of
efficiency for #M010 and
#M022 change from greater
than 1 to being smaller than
1* !or #M01?' this change
happens ,hen a % cut is set at
0*D* !rom the
:able $
The empirical
results*
#M
0
/2M (non%
risk)
-an
k /uper%/2M (non%risk)
-an
k !u""y%/2M
J0 J0*3 J0*5 J0*D J1
!u""y%
/2M
-a
nk
1 1 1 1*010BD=
1
4 I
1*010BD
=
1*010BD
=
1*010BD
=
1*010BD
=
1*010BD
= 0*3?2204 1B
0
1*010?D
B
1*010BD
=
1*010BD
=
1*010BD
=
1*010BD
=
2 1 1 1*0123D0
1
3 I 1*0123D 1*0123D 1*0123D 1*0123D 1*0123D 0*3?3232 1D
0
1*014=?
1
1*0133=
B 1*0123D 1*0123D 1*0123D
3 0*D=0DBB
1
= 0*D=0DBB
1
= I
0*D14D=
=
0*D1BD1
2
0*D2144
1
0*D2425
3
0*D2B=3
5 0*2541=? 21
0
0*DB044
D
0*D5?B=
=
0*D5045
1
0*D4144
2
0*D2B=3
5
4 1 1 2*4=03B2 2 I 2*1B2?1 2*1B2?1 2*1B2?1 2*1B2?1 2*1B2?1 1 1
0 2*1B2?1 2*1B2?1 2*1B2?1 2*1B2?1 2*1B2?1
5 1 1 1*10001?= 5 I
1*0?3=1
B
1*0?3=1
B
1*0?3=1
B
1*0?3=1
B
1*0?3=1
B 0*435105 12
0
1*0?3=1
B
1*0?3=1
B
1*0?3=1
B
1*0?3=1
B
1*0?3=1
B
= 1 1 1*0305215
1
0 I
1*022B?
1
1*022B?
1
1*022B?
1
1*022B?
1
1*022B?
1 0*3?B42D 1=
0
1*022B?
1
1*022B?
1
1*022B?
1
1*022B?
1
1*022B?
1
D 0*4?=35D
2
3 0*4?=35D2
2
3 I
1*141B3
2
1*15=55
1
1*1==03
1 1*1D=54
1*1?3B?
4 0*4BB?D? =
0
1*2=0=5
3
1*23?03
4
1*22542
1 1*2124
1*1?3B?
4
B 1 1 1*423?11= 3 I
1*423?1
2
1*423?1
2
1*423?1
2
1*423?1
2
1*423?1
2 0*=0=3?2 4
0
1*423?1
2
1*423?1
2
1*423?1
2
1*423?1
2
1*423?1
2
? 1 1 1*0522=DB D I
1*0D=3D
1
1*0B14=
?
1*0B330
B
1*0B4D?
3
1*0BD13
3 0*435?1? 11
0 1*120B
1*112?5
1
1*10=44
4
1*0??2=
4
1*0BD13
3
10 0*D21241
1
D 0*D21240?
1
D I
0*D2?=5
4
0*D33BB
3
0*D3=B0
B
0*D3?B2
2
0*D45B=
= 0*30243D 1?
0
1*005D=
3
1*00214
B
0*D?0D?
3
0*DD1==
4
0*D45B=
=
11 1 1 1*013513B
1
2 I
1*03=5B
=
1*04=3=
2
1*05431
=
1*0=204
3 1*0D323 0*425?5= 14
0
1*1111D
= 1*0??0?
1*0?141
1
1*0B3?B
B 1*0D323
12 1 1 1*0D=4=BB = I
1*4B?4D
3
1*51B2D
?
1*53B24
B
1*55BB=
2
1*5?10=
D 0*=B441 3
0
1*D1200
=
1*=D2B2
1
1*=4B15
D
1*=245D
2
1*5?10=
D
13 0*5B52D?
2
0 0*5B52D?1
2
0 I
1*2B3BB
3
1*2?B2?
4
1*30D40
=
1*314B1
4
1*32B23
5 0*55D434 5
0
1*3B?B3
1
1*3D0?=
5 1*35B5
1*345BD
2
1*32B23
5
14 0*5=1BBB
2
1 0*5=1BBB3
2
1 I
1*04D40
2
1*0=4D0
=
1*0D==D
B
1*0BB55
D
1*10=33
1 0*44554D 10
0
1*1B1=2
2
1*15DB=
D
1*142?0
D
1*12B13
B
1*10=33
1
15 0*B0=053
1
5 0*B0=052B
1
5 I
0*D134B
2
0*D14D5
2
0*D15=3
1
0*D1=53
=
0*D1D?4
B 0*24B113 22
0
0*D=0=0
2 0*D4=DD
0*D3B0=
?
0*D2?D5
4
0*D1D?4
B
1= 0*54DD=2
2
2 0*54DD=24
2
2 I
0*5D10B
D
0*5D0B4
1
0*5D0==
5
0*5D04D
B
0*5D015
4 0*1B=1?? 25
0
0*=D412
?
0*=455=
=
0*=2535
3
0*=0411
B
0*5D015
4
1D 0*44=1=B
2
4 0*44=1=B4
2
4 I
1*0??3D
B
1*103=B
3
1*10=3=
2 1*10BD
1*11021
4 0*453?21 B
0
1*1B451
2
1*1=D04
4
1*153=?
?
1*13B?B
2
1*11021
4
1B 0*441?41
2
5 0*441?41
2
5 I
0*5150?
?
0*5214=
3
0*52=1D
5
0*52=B4
B
0*52=D3
2 0*1525BB 2D
0
0*5D55=
4
0*5=55?
D
0*55B=B
=
0*54=40
4
0*52=D3
2
1? 0*3=2?5=
2
= 0*3=2?55D
2
= I
0*4=02D
3
0*4=444
5
0*4=B?D
?
0*4D41?
?
0*4B2D2
= 0*22==?B 24
0
1*0051D
2 1*00242 1*0002D
0*53=20
?
0*4B2D2
=
20 0*35=B5
2
D 0*35=B501
2
D I
0*44444
?
0*444?1
B
0*44524
2
0*4455D
D
0*44=0?
? 0*10B=04 2B
0
0*4B55?
5
0*4D542
3
0*4==5B
2
0*45B12
4
0*44=0?
?
21 0*5?434B
1
? 0*5?434B3
1
? I
0*5D?D1
2
0*5B04=
B 0*5B0??
0*5B152
=
0*5B235
B 0*1B1==4 2=
0
0*=41BD
2
0*=1?1B
=
0*=0B05
2
0*5?D42
4
0*5B235
B
22 0*2DB=?3
2
B 0*2DB=?35
2
B I
0*4=5BD
5
0*4B544
3
0*4?B?B
D
0*51310
2
0*53542
= 0*23D525 23
0
1*0150B
? 1*005D4
0*5D=1?
B
0*55?23
2
0*53542
=
23 1 1 1*033213 ? I
1*03??B
=
1*04?22
5
1*05=12
B
1*0=2B4
3 1*0D322 0*42=015 13
0
1*10B24
1
1*0?DB0
1
1*0?0B0
?
1*0B3D?
3 1*0D322
24 0*1BDD04
3
0 0*1BDD03B
3
0 I
0*254=0
1
0*25=52
3 0*25D=2
0*25BD5
1
0*2=051
3 0*004D5 30
0
0*2=D13
B
0*2=50?
1
0*2=3D5
=
0*2=241
D
0*2=051
3
25 1 1 1*02B4205 11 I 1*0D=45
1*0?052
4
1*10022
4 1*1101?
1*125==
4 0*453043 ?
0
1*1D42B
=
1*1=1D3
?
1*15303
1
1*14225
4
1*125==
4
2= 0*==051=
1
B 0*==0515B
1
B I
0*D11=2
1
0*D2D1D
4
0*D3B31
1
0*D5012
?
0*D=?2D
5 0*2D?23 20
0
0*B55B5
B
0*B31?B
4
0*B1551
5
0*D?D?4
5
0*D=?2D
5
2D 1 1 1*041250B B I
1*04100
1
1*04132
1
1*04151
5
1*041=?
=
1*04?3=
1 0*41D523 15
0
1*0?320
?
1*0B03D
B
1*0D1=D
2
1*0=2B4
3
1*04?3=
1
2B 1 1 1*15404?= 4 I 1*15405 1*15405 1*154=
1*155D=
D
1*15D31
5 0*4D210? D
0
1*1B?35
B
1*1B10=
1 1*1D44D
1*1==DB
5
1*15D31
5
2? 0*21=144
2
? 0*21=1442
2
? I
0*2DD22
5
0*2B02=
D
0*2B23D
1
0*2B453
?
0*2BD?1
D 0*0204BB 2?
0
0*3010?
3
0*2?=B2
D
0*2?414
1 0*2?15D
0*2BD?1
D
30 1 1 2*50B3D25 1 I
2*1312D
?
2*1312D
?
2*1312D
?
2*1312D
?
2*1312D
? 0*?D3225 2
0
2*1312D
?
2*1312D
?
2*1312D
?
2*1312D
?
2*1312D
?
$*%&* &hen et al* @ Economic Modelling 32 (2013) 225232 231
change in the efficiency 1alues' it is clear
that the degree of a % cut af%fects the
estimation result* The bigger the 1olatility
is' the bigger the difference bet,een the
upper and lo,er bounds of the efficiency
1alue* +n other ,ords' risk 1olatility
affects the efficiency 1alue*
/ubseGuently' regardless of the a % cut
is set' the upper and lo,er bounds of the
efficiency 1alues of #M01' 4' 5' =' B and
30 are eGual* +n such a situation' risk
1olatility has no effect on the efficiency
1alue and the risk 1ariable also does not
affect a bank8s efficiency performance*
/ummari"ing the abo1e' this research
uses the !u""y%/2M model to estimate
the efficiency 1alue to represent the
characteristic of un%certainty in risks' and
1arying the a % cut 1alue to demonstrate
the ef%fect of risk 1olatility on the
efficiency 1alue*
There are t,o issues concerning
banks efficiency and risk* .ne treats risk
as e9ogenous in order to analy"e
efficiency effects ( taullah et al*'
2004C 2arr et al*' 1??4C 2erger and
#e$oung' 1??DC &hang and &hiu' 200=C
&ebenoyan et al*' 1??3C Elyasiani et al*'
1??4C <astor' 2002)* The abo1e results
sho, that the efficiency le1el is
significantly correlated ,ith the risk
indicators* The other issue treats risk as
endogenous in order to analy"e banks
efficiency ( ltunbas et al*' 2000C &hang'
1???C &hiu and &hen' 200BC #rake and
(all' 2003C Eirardone et al*' 2004C
(ughes' 1???C (ughes et al*' 2001C
Mester' 1??=C <astor' 1???)* (o,e1%er'
the ma;ority of literatures adopt the
o1erdue loan ratio as the substi%tute
1ariable for risks' ,hich
does not reflect the
characteristic of uncertainty
that risks display*
;. Conclusion
)ith the increasing
freGuency of financial
disasters and its de1as%tating
impact o1er the recent years'
countries around the ,orld
ha1e begun to pay much
more attention to financial
risk management* The fact
that the financial industry is
the supporting structure to a
country8s economic* This
research firstly deri1es
models from the the%ories'
using trigonometry as the
basis to de1elop the !u""y%
/2M model for the empirical
study* /ubseGuently' banks in
Tai,an ,ere used as the
sample for the study' ,ith
the research carrying out
inter%1al estimation of 7a-
1alues for use as the input
1ariables* )e then used the
!u""y%/2M model to
estimate the upper and lo,er
bounds of the efficiency
1alue for the banks' ,hile
1arying the a % cut 1alue to
represent the effect of risk
1olatility on the efficiency
1alue* Empir%ical results
from the research sho, that6
1) The performance of most
#M0s 1aries according to
the risk factor* 2) The a % cut
1alue affects the efficiency
1alue' and therefore risk
1olatility affects the
efficiency 1alue* The higher
1olatility leads to a greater
difference bet,een the upper
and lo,er bounds of the
efficiency 1alue' ,hile
con1ersely' no 1olatility in
risk means that the efficiency
1alue is fi9ed* 3) !or some
#M0s' regardless of the a %
cut 1alue' their upper and
lo,er bounds of efficiency
1alue are eGual' meaning that
risk 1olatility does not affect
their efficiency 1alues and
the risk 1ariable does not
affect their efficiencies* 4)
The risk 1ariable is a factor
in the estima%tion of
efficiency 1alues and in the
determination of the ranking
of efficiencies*
The !u""y%/2M model
deri1ed in this research paper
uses trigonom%etry as the
basis to estimate efficiency
1alues as triangular
membership functions* This
model conforms to the
characteristic of forecasting
7a- and differs from
traditional #E models in
that the results it produces
can better demonstrate the
implications of risk and the
effects of risk on efficiency*
The ma;ority of literatures
adopt the o1erdue loan ratio
as the substitute 1ariable for
risks pro9y 1ariable' ,hich
does not reflect the characteristic of
uncertainty that risks display ( ltunbas
et al*' 2000C &hang' 1???C &hiu and
&hen' 200BC #rake and (all'
2003Eirardone et al*' 2004C (ughes'
1???C (ughes et al*' 2001C Mester' 1??=C
<astor' 1??? )* Thus' the main
contribution of this article consists of the
utili"a%tion of 7a- as risk 1ariables to
reflect the features of risk fluctuation en%
countered by banks* 2esides' in this
article' the efficiency 1alues calculated
using the !u""y%/M2 are membership
functions' so the
e1aluated efficiency 1alue is
in fact an inter1al 1alue ,ith
the function of anticipating
the prospecti1e efficiency
performance* The results
obtained differ from that
calculated by traditional
#E models as a constant*
#ata En1elopment
nalysis (#E) is a non%
parameter approach to
e1aluate the performance of
#M08s efficiency and the
1ariables used in #E are all
accurate 1alues* (o,e1er'
,hen the input or output
1ariables are fu""y' the
performance of #M0s must
proceed by the !u""y%#E*
The limitations of this study
consist in the risk assessment
method suggested by 2asel
++* The method is able to
produce the ap%pro9imate
estimations of the 7a- of the
banks in Tai,anC ne1erthe%
less' influenced by the
limitations of incomplete
data' this study simply can
e1aluate a part of the risk
conditions* +n addition' due
to the different financial
en1ironment in each nation
and the great di%1ersity of
banks8 in1estment
deployment' the situations of
Tai,anese banks may not
reflect the actual financial
en1ironment in other coun%
tries* This article' therefore'
pro1ides a more applicable
#E assess%ment method for
reference*
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