Measuring the Efficiency of Korean SMB Mutual Savings Banks Using Data Envelopment Analysis

Currently, mutual savings banks(MSBs) that are small, domestic enterprises have lower benefits rates than other financial areas and higher rates of non-performing-loans; therefore, they run into financial problems. However, being small and domestic, such MSBs maintain local contact, have abundant local information, promptly make decisions, and attempt to flexibly develop various products. This study analyzes management efficiency, scale benefits, and reference frequencies of 50 MSBs that were small enterprises; the study was conducted in 2007. It uses CCR-O(Chames, Cooper, and Rhodes-Output-oriented) and BCC-O( Banker, Charnes, and Cooper-Output-oriented) DEA (Data Envelopment Analysis) models to analyze the efficiencies of MSBs as small, domestic enterprises. The number of Decision Making Units (DMUs) that are efficient in the BCC framework is 19; the corresponding number for the CCR framework is 9. The enterprises for which the scale efficiency is unity are the same as those which are CCR-efficient; these 9 enterprises can be said to efficiently manage and properly use their scales. Scale benefits are indicated as follows: 25 enterprises have increasing returns to scale(IRS); 16 have constant returns to scale(CRS), and 9 have decreasing returns to scale(DRS). In terms of the scale benefits of MSBs that are small enterprises, the efficiency of enterprises will improve through increasing, constant, or decreasing scale. In addition, through reference collections and the values of Lambda of benchmark enterprises, an inefficient enterprise can identify those enterprises against which it can benchmark itself. In this study, for analyzing the efficiencies of MSBs as small, domestic enterprises, most of the input and output variables that are employed are general and financial in nature.