Measuring firm performance with DEA and prior information in Taiwan's banks

Abstract

This paper combines data envelopment analysis (DEA) measurements and manager prior opinion measurements to generate a posterior measurement for an overall measurement of the technical efficiency of banks in Taiwan. The involvement of mutual participation of bank managers in the evaluation process provides refined evaluation results and explicit corporation atmosphere among bank's evaluation operations. The empirical results indicate that the posterior measurement differs from the original DEA efficiency scores and/or financial ratios, which in turn indicates that bank efficiency can be measured by applying the methodology of Bayesian concept.