Evaluating branch efficiency of a Taiwanese bank using data envelopment analysis with an undesirable factor

This study applies a novel evaluation model to identify resource utility rate in the banking sector for enhancing branch operations. The Data Envelopment Analysis (DEA) model including undesirable-factor developed by Seiford and Zhu (2002) is used to determine the operational efficiency of each studied bank branch. This study identifies non-performing loan ratio as an undesirable output. Results indicate that the efficiency score differs between traditional DEA and the undesirable-factor DEA model considered here. Insufficient branches generally exhibit wasted personnel expenses and low profits. The study results can offer feasible strategies for adoption by bank branch managers to enhance performance.