Combining multi-criteria and directional distances to decompose non-compensatory measures of sustainable banking efficiency

ABSTRACT

Non compensatory choices are widespread in the economics, strategic management and decision making. Nevertheless, many assessments of productivity still fail to consider non-compensatory preference structures in the measure of the technical inefficiency. This paper proposes a preference elicitation schema, typical of Multi-criteria decision analysis, for the selection of the directional vector in the assessment of a sustainable productivity. The direction choice is based on the weighted aggregation of concordance indexes for each decision criteria on each individual input, such that it represents an index of relative importance according to the decision maker’s perspective. The methodology can be used to aid resource allocation and saving, identify benchmarks for efficient practices and more generally for planning environmental policies in many services and industrial organizations. We illustrate the method with an environmental efficiency evaluation of Brazilian Federal Saving Bank branches.

KEYWORDS:

• Directional distance functions
• data envelopment analysis
• multi-criteria decision analysis
• banks
• environmental efficiency

JEL CLASSIFICATION:

• C67
• C44
• D81
• G21
• Q29

Disclosure statement

No potential conflict of interest was reported by the authors.