Do market share and efficiency matter for each other? An application of the zero-sum gains data envelopment analysis

Abstract

Current studies that use traditional data envelopment analysis (DEA) neglect the 100% market share restriction. This study adopts zero-sum gains data envelopment analysis to measure the efficiency scores of securities firms (SFs) and indicates that the traditional DEA model underestimates the efficiency scores of inefficient SFs. This research analyses 266 integrated securities firms in Taiwan from 2001 to 2005 and employs three inputs (fixed assets, financial capital, and general expenses) and a single output (market share). The foreign-affiliated ownership of SFs positively affects the efficiency scores. The two-stage least squares procedure confirms that the market share and efficiency score simultaneously reinforce each other.

Keywords:

• zero-sum gains data envelopment analysis (ZSG-DEA)
• panel data
• two-stage least squares procedure (2SLS)

Acknowledgements

The authors are grateful to an anonymous referee and a joint editor of this journal for their constructive comments, which have led to substantial improvements in this paper. Partial financial support from Taiwan's National Science Council (NSC96-2415-H-009-002-MY2) is gratefully acknowledged.