Analyzing profit efficiency of banks in India with undesirable output – Nerlovian profit indicator approach | Zendy

A.R. Jayaraman | Zendy; M. R. Srinivasan | Zendy

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Analyzing profit efficiency of banks in India with undesirable output – Nerlovian profit indicator approach

Author(s) -

A.R. Jayaraman,

M. R. Srinivasan

Publication year - 2014

Publication title -

iimb management review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.425

H-Index - 20

eISSN - 2212-4446

pISSN - 0970-3896

DOI - 10.1016/j.iimb.2014.09.003

Subject(s) - inefficiency , allocative efficiency , profit (economics) , economics , factoring , microeconomics , econometrics , finance

The objective of this paper is to provide a holistic approach to measure the profit efficiency of banks, factoring desirable/undesirable outputs, using Nerlovian profit indicator approach. The profit inefficiency of banks has been decomposed into technical and allocation inefficiency using directional distance function. Results reveal that profit inefficiency of banks is primarily due to allocative inefficiency and the impact of technical inefficiency on profit inefficiency is minimal compared to allocative inefficiency, which indicates that banks need to focus on optimal utilization of input–output mix to enhance profit efficiency

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