Promoting management efficiency is always a big concern either to profit-making or non-profit-making organizations. An efficient firm indicates that the leader manages well. To a profit-making unit, the term “efficiency” means “rapid production”, “the offer of distribution” and “related services” which could save time and the good use of manpower and resources are also included. Therefore, the promotion of management efficiency becomes an important issue for the organization to survive successfully and to fight with other competitors.
This study was to present the evaluation of management efficiency of some commercial banks in Taiwan. Some factors were selected as the “input items” and “output items”from the financial reports of these commercial banks in Taiwan from 1999 to 2001. It evaluated the efficiency performance of these commercial banks according to the evaluation theory of Farrell and Data Envelopment Analysis. The relative efficiency in the process of the transferring from “input items” to “output items” was also concerned. From the changes in “input items”, it could show how efficiency value changes. By these two analyses (Slack Variables Analysis and Scale Efficiency Analysis), the results could show a direction in order to improve the efficiency of all these commercial banks.
38 commercial banks were selected and evaluated in this research. The information collected from financial reports was to construct a model in order to evaluate management efficiency of all subjects. This investigation involved “overall efficiency ”, “overall technical efficiency”, “pure technical efficiency”, “scale efficiency”, and “allocative efficiency ”. Apart from these calculation, all subjects were grouped into three parties: namely “old commercial banks”, “new commercial banks” and “commercial banks upgraded from credit cooperative”; by cross and vertical analysis the result provided the comparison of management efficiency among these three groups.
Using the CCR and BCC models, the overall efficiency value and technical efficiency became available. The Return to Scale was derived by the use of CCR model. The first finding from financial reports in 2001 showed that the top five as the most efficient banks among 38 subjects were Cathy United Bank, Taishin International Bank, Taipei Bank, Fubon Commercial Bank and Bank of Kaohsiung respectively. The bottom five subjects were Chung Shing Bank, Kao Shin Commercial Bank, Cota Commercial Bank, Pan Asia Bank and Union Bank of Taiwan.
The Second finding showed that the “old commercial banks” represented the highest efficiency value in the analysis, which was based on 2001 financial reports. Both the “new commercial banks” and “commercial banks upgraded from credit cooperative” had efficiency value, which was below the average efficiency value of all subjects. This was different from the result based on financial report in 2000, which showed that the “new commercial banks” had the highest efficiency value. This represented the overall efficiency of the “old commercial banks” was improving and that of the “new commercial banks” was getting worse.
Thirdly, through “Slack Variables Analysis (SVA)”, the result would indicate a direction for these “less-efficient” subjects for improvement. The decision-maker could follow this direction to restructure or reallocate resources, and refer to the allocation of resources and strategies application of those subjects, which with overall efficiency, in order to improve its management efficiency and reach the optima production.
The fourth, using "Analysis of Variance (ANOVA)" to test whether the efficiency values were different between these three groups. The result showed that the efficiency values between these three groups were significantly different in 2001. According to Scheffe's S method, the difference was derived from the scale efficiency between the groups of "new commercial banks" and "commercial banks upgraded from credit cooperative".
Finally, according to the regression analysis, the result showed that the overall efficiency measure is negatively related to overdue loans but positively related to BIS ratio. The other items, such as the numbers of branch, the numbers of employee, capital and the numbers of ATM, which were non-related to the overall efficiency.