The role of takeovers in increasing efficiency

This paper extends the limited number of studies that examine whether the threat of takeovers serves as an efficiency-enforcement mechanism. A nonparametric programming approach is utilized to construct a measure of overall efficiency that is decomposed into technical and allocative components. Utilizing three inputs and five outputs, measures of efficiency are constructed for a sample of 578 banks from states that permit acquisitions and states that do not. The results indicate that, on average, banks that are subject to takeovers tend to be more efficient Furthermore, the lack of threat of takeovers appears to induce inefficiencies that are technical in nature. The evidence lends support to the hypothesis that the threat of takeovers improves efficiency in firms.     

Impact of conversion to Critical Access Hospital status on hospital efficiency

This study examines the impact of Critical Access Hospital (CAH) Program on hospital efficiency using a two-stage approach, where data envelopment analysis is used in the first stage to estimate cost, technical, and allocative efficiency scores of a sample of rural hospitals. Densities of efficiency scores of CAHs and prospectively paid rural hospitals are estimated and compared using a nonparametric kernel density estimator and a bootstrap-based test. In the second stage, efficiency scores are regressed on environmental variables using bootstrapped truncated regressions. Density analysis and results from bootstrapped truncated regressions show that CAHs are less cost and allocatively efficient compared to prospectively paid rural hospitals, without being less technically efficient. Relative to their pre-conversion selves, CAHs appear to be slightly less allocatively efficient, while they are slightly more technically efficient and no less cost efficient. Overall, our results suggest that the CAH Program may have decreased the allocative and cost efficiencies of those rural hospitals that converted to CAH status relative to prospectively paid rural hospitals, without significantly increasing their technical efficiency.     

Firm efficiency and stock returns

In this paper, we investigate the role of firm efficiency in asset pricing using a sample of US publicly listed companies for the period 1988–2007. We employ non-parametric data envelopment analysis (DEA) on various input/output combinations, focusing on sales and market value as output measures in the construction of the frontier technologies. Using these performance measures, we examine whether efficient firms perform differently from inefficient firms following standard financial analysis procedures. First, we employ performance attribution regressions, by forming portfolios based on efficiency scores and tracking the performance of the various portfolios over time. Second, we perform cross-sectional/panel regressions to determine whether firm efficiency indeed has explanatory power for the cross-section of stock returns. Our results suggest that firm efficiency plays an important role in asset pricing and that efficient firms significantly outperform inefficient firms even after controlling for known risk factors.     

Profit efficiency in the European Union banking industry: a directional technology distance function approach

We employ the directional technology distance function approach and present estimates of profit efficiency in the 25 European Union (EU) member states over the period 1998–2008. This method decomposes profit efficiency into its technical and allocative components. We investigate potential efficiency differences across the old EU region and the new EU member states, across countries and across banks of different size. Our results indicate a significant level of profit inefficiency for the EU region, which is predominantly attributed to allocative inefficiency. Our findings also suggest that banks operating in the old EU region are, on average, more profit efficient than credit institutions in the new EU member states. Overall, we observe considerable variation of efficiency scores across countries and different patterns in efficiency change over time, as well as a negative relationship between bank size and efficiency.     

Decomposition of cost efficiency and its application to Japanese-US electric utility comparisons

This paper presents a new formula for decomposing cost efficiency into technical, price, and allocative efficiencies in an environment marked by the fact that unit input prices differ among certain enterprises. We employed this formula in comparing cost efficiency between Japanese and US electric power companies, and found a significant difference in the price-based efficiency. However, negligible differences were found in the technical and allocative efficiencies.     

基于超效率DEA和Tobit模型的中国上市煤炭企业经营效率现状分析

本文运用数据包络分析（DEA）方法和Tobit回归模型,首先选取2011年沪深两市具有代表性的18家煤炭上市公司为研究对象,以货币资金、流动资产合计、长期股权投资、固定资产和非流动资产合计为投入变量,主营业务收入、主营业务利润、利润总额为产出变量,运用CCR模型从技术效率、纯技术效率和规模效率等方面对其经营效率进行评价和分析;其次运用超效率DEA模型对CCR模型下DEA有效的决策单元计算其超效率值,从而为所有决策单元提供完整的效率值排序;最后,本文运用Tobit模型,分析影响中国上市煤炭企业经营效率的重要因素,为决策者提供提高企业经营效率的方向和政策。     

The relative efficiency of public versus private municipal bus firms: An application of data envelopment analysis

This article has employed the data envelopment analysis method to evaluate the efficiency of the five bus firms in Taipei city. When vehicle kilometers (revenue or the measure combining vehicle kilometers, revenue and the number of traffic trips on routes) was used as the output measure, it concluded that the publicly owned Taipei Municipal Bus had increased (not increased) its technical efficiency after the government liberalized the urban bus market. This article also found that in both the one output (vehicle kilometers) and three outputs cases, Taipei Municipal Bus had, on an average, lower efficiency scores than the private firms, and that while each firm usually employed a linear production technology for several, consecutive years the private firms were more flexible in adopting different technologies.     

Assessing French nursing home efficiency: An indirect approach via budget-constrained DEA models

In this paper, data envelopment analysis (DEA) techniques are applied to the French nursing home industry in order to address two policy issues. The first involves nursing home size and returns to scale, while the second deals with the potential effects of a change in nursing home reimbursement from a flat rate to one based on the severity of case-mix. To accomplish this, our analysis expands on the existing nursing home literature to analyze technical and allocative efficiency along with budget-constrained models rather than the more common direct input-based distance function. Technical efficiency is evaluated via an indirect output distance function while allocative output efficiency is computed with a cost indirect revenue function. The findings suggest that system-wide efficiency and equity may result from coming reforms since payments would more accurately reflect resource use.     

A Note on the Technical and Allocative Efficiency of Local Exchange Carriers in the United States

The issue explored is whether incentive regulation of local exchange carriers in the United States has resulted in an increase in efficiency. After providing an overview of the nature of incentive regulation, the methodology for measuring the effects of incentive regulation on efficiency is reviewed. This methodology is data envelopment analysis and allows for the measurement of both technical efficiency and allocative efficiency of individual local exchange carriers. The results of empirically implementing the DEA approach indicate that there is little change in technical efficiency. In fact average technical efficiency in 1988 was the same as in 2001. Next, while outputs continued to grow at about their historical rate across LECs, the sizeable increase in the two types of capital increased inputs well above their historical average rates for some LECs leading to short run allocative inefficiency. On average, however, allocative efficiency shows no identifiable trend between 1988 and 2001. Finally, in the aggregate, total economic efficiency does not demonstrate any trend between 1988 and 2001.     

A Consistent Approach to Cost Efficiency Measurement*

Consistent specifications of the allocative inefficiency function in ‘cost plus input share equations’ systems may be difficult, if not impossible, to find because most plausible ones violate certain reasonable a priori conditions. Moreover, the models to which they lead give rise to highly non‐linear likelihood functions that are very hard to estimate. In an effort to confront these difficulties, this paper adapts an idea first suggested by Greene (1993) that allocative inefficiency ought to be related to input prices and allocative distortions in the input share equations. The system of ‘cost plus input demand equations’ that emerges is estimated by standard seemingly unrelated regression (SUR) techniques using data from private and state firms that operated in Greek manufacturing during the 1979–88 period. Among other findings, the estimates show that overall inefficiency for private and state firms was 63.5% and 102.2%, respectively in comparison with the least inefficient firms in their class. In relative terms these figures imply that state firms were almost 61% less efficient than private firms were. Technical and allocative reasons amounting to 64% and 36%, respectively, accounted for this excess inefficiency of state firms, in addition to differences in the utilization of labour, capital and debt. Lastly, it is found that the magnitudes of technical and allocative inefficiencies depend critically upon a self‐consistent specification of the allocative inefficiency function.     

Estimation and decomposition of inefficiency when producers maximize return to the outlay: an application to Norwegian fishing trawlers

This paper deals with estimation of a production technology where endogeneous choice of input and output variables is explicitly recognized. In particular, we assume that producers maximize return to the outlay (RO). For simplicity and tractability we start with a Cobb–Douglas transformation function with multiple inputs and outputs and show how the first-order conditions of RO maximization can be used to derive an estimating equation which is nothing but a partial input productivity equation. This equation does not suffer from the econometric endogeneity problem although the output and input variables are endogenous. First, we consider the case where producers are fully efficient allocatively but technically inefficient. The model is estimated using a single equation stochastic frontier approach. The model is then extended to allow allocative inefficiency and it is estimated as a system using generalized method of moment. Algebraic expressions are derived to decompose the effect of technical and allocative inefficiencies on RO. We also consider translog specifications that are estimated as (1) a single equation frontier model as well as (2) a system. We use a panel of Norwegian fishing trawlers data to estimate the model. Outputs are different species caught while inputs are labor and vessel size. We also control for number of days of operation, age of the vessel and year effects. Empirical results show that the average rate of RO is reduced by about 20 to 30 % due to technical inefficiency. On the other hand, average allocative efficiency is found to be about 78 %. The average overall efficiency is found to be around 60 %.     

The economics of managerialism and the drive for efficiency in policing

The UK has recently proposed to develop a set of criteria whereby the economic analysis of police force efficiency is to be made standard. This follows a strategy of aiming for improvement through managerialism and best value performance indicators, similar to those implemented by US police forces after the Government Performance and Results Act 1993. In this paper we attempt to put this recent development of efficiency targeting into a UK historical/evolutionary context and provide one of the first attempts to use data envelopment analysis to analyse the allocative, as well as technical efficiency, of police forces in England and Wales. Copyright © 2004 John Wiley & Sons, Ltd.     

A test for the existence of allocative inefficiency in firms

This paper is concerned with the problem of testing for the presence of allocative inefficiency in firms for models in which the cost function is stochastic, the possibility of technical inefficiency is allowed, and the efficient input cost share equations are stochastic. The test exploits the relationships among the disturbances in the cost and share equations to derive implications of the existence of allocative inefficiency. This leads to the use of a Wald-type statistic to take account of the one-sided nature of the alternative. Some empirical experience is reported.     

Beyond profitability: effects of acquisitions on technical efficiency in the Italian pasta industry

Unlike traditional studies on the impact of ownership changes—which use either profitability measures or stock prices—this paper investigates the impact of acquisitions on acquired firms' technical efficiency. Using a panel of Italian firms in the pasta industry for the 1981–1997 period, I estimate a stochastic production frontier with exogenous factors affecting efficiency in a translog specification with non‐neutral technical progress. The main result is that acquired firms experience, within the 6 years period following the acquisition, an increase in technical efficiency of the order of 10%. This result is statistically significant and proves to be robust with respect to the inclusion of size and calendar year effects as explanatory variables of firms' inefficiency. These findings contribute to the debate on the welfare gains of ownership changes by providing evidence that mergers and acquisitions lead to cost savings, due to the reduction of acquired firms' X‐inefficiency. Copyright © 2002 John Wiley & Sons, Ltd.     

The impact of corporate governance on state-owned and non-state-owned firms efficiency in China

The purpose of this paper is to expand the literature on the corporate governance of transition economies by analyzing the relationship between corporate governance and productive efficiency in China's publicly listed manufacturing industry firms. We use the principal component analysis and the hybrid meta-frontier DEA model, separating inputs into radial inputs that change proportionally and non-radial inputs that change non-proportionally to measure the technical efficiency and technology gap ratios of publicly listed Chinese firms in different manufacturing industries during 2010–2013. The input variables are the net value of fixed assets, staff number, and the characteristics of the corporate governance system, while the output variables are gross revenue and total profit. The empirical result shows that inefficiency due to corporate governance is the main reason for lower efficiency in most manufacturing firms. For the technology gap ratio (TGR), the metal and mineral and the machinery, equipment and instrument are the two highest efficient sectors, whereas the paper and allied products sub-industry has the lowest efficiency during 2010–2013. In addition, the ratio of state-owned firms whose inefficiency is mainly caused by corporate governance to total state-owned firms is greater than that of non-state-owned firms in each year. The TGR analysis shows that the efficiency performance of non-state-owned firms is greater than state-owned firms.     

Rural hospital performance and its correlates

The cost, technical, allocative and scale efficiencies of a sample of rural U.S. hospitals are calculated via linear programming models. Tobit analysis is used to assess possible correlates of each of the efficiency measures. A large amount of dispersion in operating efficiency is found within our data set; the majority of the dispersion is due to technical inefficiency. In general, for-profit hospitals are found to outperform not-for-profit and public hospitals. Demand characteristics, quality of care, and the mix of services offered are also found to influence performance.     

Export orientation and technical efficiency: clothing firms in China

Based on 287 of the largest clothing manufacturing firms in southern China in terms of output value, we employed data envelopment analysis to estimate the technical efficiency of the sample firms. A regression analysis was conducted to examine the effects of export orientation on technical efficiency. Our results suggest a U‐shaped relationship between export ratio and technical efficiency. The specific nature of the industry in Guangdong province can explain that clothing firms with a high degree of sales in the domestic market or with a high level of export orientation experience a higher level of technical efficiency than those firms trying to conquer both the local and the overseas markets. Copyright © 2010 John Wiley & Sons, Ltd.     

Distorted prices and producer efficiency: the case of Romania

This research aims at shedding empirical light on the relative efficiency of small-scale maize producers in Romania. Farmers in transition countries still face heavily distorted price systems resulting from imperfect market conditions and socioeconomic and institutional constraints. To capture such distortions we formulate a stochastic shadow-cost frontier model to investigate the systematic input-specific allocative inefficiency. We further adjust the underlying cost frontier by incorporating shadow price corrections and subsequently reveal evidence on farm specific technical inefficiency. Different models are estimated due to the imposition of curvature correctness and the effects on the individual efficiency estimates are shown. The empirical results show a relative high technical efficiency of the small-scale farmers but relatively poor scores on systematic input price efficiency. The usage of extension services as well as agricultural training on the farm level are found to have a positive effect on the technical efficiency level of the farms. All model specifications further agree on the negative effect on efficiency with respect to the use of insecticides. The imposition of functional concavity on the shadow cost frontier leads to relative differences in the efficiency estimates of up to 240%.      

Innovation efficiency of semiconductor industry in China: A new framework based on generalized three-stage DEA analysis

Considering the interrelationships between periods and the influences of non-operational factors, a new framework based generalized three-stage DEA model, grey relational analysis theory and disparity disassembly model is proposed in this paper. Then, we measure the technical efficiency, scale efficiency, and pure technical efficiency of innovation in China's semiconductor industry between 2009 and 2014. In addition, we conducted projection analysis of the inputs to innovation and the disparities analysis in innovation efficiency across the industrial chain and within each segment. The results of our analyses reveal four key findings. The overall innovation efficiency of China's semiconductor industry is increasing; however, each segment of the industrial chain had different trends and different levels of innovation efficiency. All segments show a consistently upward trend except for package testing, which dipped in 2012 due to the time lag between the inputs and outputs associated with major technological advancements. The most efficient innovation is occurring in design and package testing, followed by manufacturing, materials, and equipment, in that order. Low levels of innovation efficiency were found to be the most significant factor restricting further improvement in the design, manufacturing, and equipment segments of the industrial chain. But the opposite is true for the package testing segment, where pure technical efficiency is the main factor. A range of redundancies in input were found across the industrial chain, mostly in manufacturing and equipment. These two segments are capital-intensive and characterized by a high level of technical complexity coupled with a long research cycle. The disparities in innovation efficiency in and between the segments decreased over the period. However, interestingly, the main disparities were found among the enterprises within each segment, which we attribute to the Chinese government's concerted efforts to support particular companies. Package testing and manufacturing had the highest levels of disparity due to relatively high agglomeration of these two segments. The materials segment had the lowest disparity, with equipment and design falling somewhere in-between.     

Scale efficiencies in US telecommunications: An empirical investigation

In this paper we evaluate scale efficiency patterns of local operating companies in the US telecommunications industry. Scale efficiency is defined as the ability of each company to operate as close to its most productive scale size as possible, and is calculated using data envelopment analysis. The analysis of scale efficiencies is conducted for a set of 39 local operating companies, over six time periods: 1975, 1978, 1981, 1984, 1987 and 1990. During these time periods, several technical and institutional changes took place in the industry which are likely to have had an impact on the abilities of the companies to exploit feasible scale efficiencies, and we find that scale efficiencies have steadily increased over these time periods. We also establish that the Bell operating companies are no different from the independent companies in their ability to be scale efficient; single-state firms are relatively more scale efficient; line digitization, during the periods studied, has not significantly impacted scale efficiency; and firms belonging to multi-company parents are more scale efficient. Additionally, policy regime changes, such as the introduction of intra-LATA toll market competition and incentive regulation schemes, have positively impacted firms' abilities to attain scale efficiency, while micro-segment competition in local markets have, so far, not had the expected impact.