Evaluating productive efficiency:comparative study of commercial banks in Gulf countries

Financial institutes are an integral part of any modern economy. In the 1970s and 1980s, Gulf Cooperation Council (GCC) countries made significant progress in financial deepening and in building a modern financial infrastructure. This study aims to evaluate the performance (efficiency) of financial institutes (banking sector) in GCC countries. Since, the selected variables include negative data for some banks and positive for others, and the available evaluation methods are not helpful in this case, so we developed a Semi Oriented Radial Model to perform this evaluation. Furthermore, since the SORM evaluation result provides a limited information for any decision maker (bankers, investors, etc...), we proposed a second stage analysis using classification and regression (C&R) method to get further results combining SORM results with other environmental data (Financial, economical and political) to set rules for the efficient banks, hence, the results will be useful for bankers in order to improve their bank performance and to the investors, maximize their returns. Mainly there are two approaches to evaluate the performance of Decision Making Units (DMUs), under each of them there are different methods with different assumptions. Parametric approach is based on the econometric regression theory and nonparametric approach is based on a mathematical linear programming theory. Under the nonparametric approaches, there are two methods: Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH). While there are three methods under the parametric approach: Stochastic Frontier Analysis (SFA); Thick Frontier Analysis (TFA) and Distribution-Free Analysis (DFA). The result shows that DEA and SFA are the most applicable methods in banking sector, but DEA is seem to be most popular between researchers. However DEA as SFA still facing many challenges, one of these challenges is how to deal with negative data, since it requires the assumption that all the input and output values are non-negative, while in many applications negative outputs could appear e.g. losses in contrast with profit. Although there are few developed Models under DEA to deal with negative data but we believe that each of them has it is own limitations, therefore we developed a Semi-Oriented-Radial-Model (SORM) that could handle the negativity issue in DEA. The application result using SORM shows that the overall performance of GCC banking is relatively high (85.6%). Although, the efficiency score is fluctuated over the study period (1998-2007) due to the second Gulf War and to the international financial crisis, but still higher than the efficiency score of their counterpart in other countries. Banks operating in Saudi Arabia seem to be the highest efficient banks followed by UAE, Omani and Bahraini banks, while banks operating in Qatar and Kuwait seem to be the lowest efficient banks; this is because these two countries are the most affected country in the second Gulf War. Also, the result shows that there is no statistical relationship between the operating style (Islamic or Conventional) and bank efficiency. Even though there is no statistical differences due to the operational style, but Islamic bank seem to be more efficient than the Conventional bank, since on average their efficiency score is 86.33% compare to 85.38% for Conventional banks. Furthermore, the Islamic banks seem to be more affected by the political crisis (second Gulf War), whereas Conventional banks seem to be more affected by the financial crisis.

Relational incentive policies in cross-border interfirm relationships

How an exporter can effectively craft a distributor agreement that encourages its network of foreign distributors to respond in pro-relational ways? This is an important issue as previous research has shown that relationship quality was linked to export performance. However, research failed to propose managerial tools that allowed exporters to foster relational phenomena in cross-border relationships. In this study, we suggest that exporters can influence importers' attitudes and behaviors with relational incentives policies. We also show that the impact of these policies is impervious to the noise, i.e., psychic distance and information asymmetry, that characterizes international business relationships. Our hypotheses are tested via structural equations modeling with data from a sample of French exporters.

The role of HR in cross-border mergers and acquisitions:the case of Indian pharmaceutical firms

Mergers and acquisitions (M&) are increasingly becoming a strategy of choice for companies attempting to achieve and sustain competitive advantage. However, not all M&As are a success. In this paper, we examine the three main reasons highlighted in the literature as major causes of M&A failure (clashing corporate cultures, absence of clear communication, and employee involvement) in three Indian pharmaceutical companies, and we analyze the role played by the HR function in addressing them. Also, we discuss the importance of gaining the commitment and focus of the workforce during the acquisition process through employee involvement.

Measuring productive efficiency using Nerlovian profit efficiency indicator and metafrontier analysis

The aim of this paper is to illustrate the measurement of productive efficiency using Nerlovian indicator and metafrontier with data envelopment analysis techniques. Further, we illustrate how profit efficiency of firms operating in different regions can be aggregated into one overarching frontier. Sugarcane production in three regions in Kenya has been used to illustrate these concepts. Results show that the sources of inefficiency in all regions are both technical and allocative, but allocative efficiency contributes more to the overall Nerlovian (in)efficiency indicator. © 2011 Springer-Verlag.

Total productive maintenance implementation in the newspaper printing industry:an action research approach

The objective of Total Productive Maintenance (TPM) is to maximise plant and equipment effectiveness, to create a sense of ownership for operators, and promote continuous improvement through small group activities involving production, engineering and maintenance personnel. This paper describes and analyses a case study of TPM implementation at a newspaper printing house in Singapore. However, rather than adopting more conventional implementation methods such as employing consultants or through a project using external training, a unique approach was adopted based on Action Research using a spiral of cycles of planning, acting observing and reflecting. An Action Research team of company personnel was specially formed to undertake the necessary fieldwork. The team subsequently assisted with administering the resulting action plan. The main sources of maintenance and operational data were from interviews with shop floor workers, participative observation and reviews conducted with members of the team. Content analysis using appropriate statistical techniques was used to test the significance of changes in performance between the start and completion of the TPM programme. The paper identifies the characteristics associated with the Action Research method when used to implement TPM and discusses the applicability of the approach in related industries and processes.

Perceived risks in cross-border transactions in agri-food chains

Nowadays, agri-food chains are more global than ever and are characterized by increased imports and exports and global sourcing of products, resulting in increased cross-border transaction risks. The objective of this paper is to identify the typical risks regarding agri-food supply chains involved in cross-border transactions and to assess their importance as perceived by agri-food managers. The analysis takes into consideration four different agrifood value chains (meat, grain, olive oil, fresh vegetables and fruits). Following an explorative approach and a qualitative technique, a series of face to face in-depth interviews was conducted. Results indicate that risk perception may be quite different across countries, value chains, tiers of the supply chain, as well as across respondents. The prevalence of Market dynamics risks was pointed out in most of the interviews, yielding the impression that many operators identify the market as the most difficult environment. Differences in risk perception between fresh produce (fruit/vegetables and meat) and processed food chains (grain and olive oil) are probably interrelated to the different degree of integration within these supply chains, the different level of standardization achieved and the different causes of risks that are inherent to the nature of the product.

An empirical investigation on firm-level performance of cross border mergers and acquisitions

This empirical study investigates the performance of cross border M&A. The first stage is to identify the determinants of making cross border M&A complete. One focus here is to extend the existing empirical evidence in the field of cross border M&A and exploit the likelihood of M&A from a different perspective. Given the determinants of cross border M&A completions, the second stage is to investigate the effects of cross border M&A on post-acquisition firm performance for both targets and acquirers. The thesis exploits a hitherto unused data base, which consists of those firms that are rumoured to be undertaking M&A, and then follow the deal to completion or abandonment. This approach highlights a number of limitations to the previous literature, which relies on statistical methodology to identify potential but non-existent mergers. This thesis changes some conventional understanding for M&A activity. Cross border M&A activity is underpinned by various motives such as synergy, management discipline, and acquisition of complementary resources. Traditionally, it is believed that these motives will boost the international M&A activity and improve firm performance after takeovers. However, this thesis shows that such factors based on these motives as acquirer’s profitability and liquidity and target’s intangible resource actually deter the completion of cross border M&A in the period of 2002-2011. The overall finding suggests that the cross border M&A is the efficiency-seeking activity rather than the resource-seeking activity. Furthermore, compared with firms in takeover rumours, the completion of M&A lowers firm performance. More specifically, the difficulties in transfer of competitive advantages and integration of strategic assets lead to low firm performance in terms of productivity. Besides, firms cannot realise the synergistic effect and managerial disciplinary effect once a cross border M&A is completed, which suggests a low post-acquisition profitability level.

Assessing productive efficiency of banks using integrated Fuzzy-DEA and bootstrapping:a case of Mozambican banks

Performance analysis has become a vital part of the management practices in the banking industry. There are numerous applications using DEA models to estimate efficiency in banking, and most of them assume that inputs and outputs are known with absolute precision. Here, we propose new Fuzzy-DEA α-level models to assess underlying uncertainty. Further, bootstrap truncated regressions with fixed factors are used to measure the impact of each model on the efficiency scores and to identify the most relevant contextual variables on efficiency. The proposed models have been demonstrated using an application in Mozambican banks to handle the underlying uncertainty. Findings reveal that fuzziness is predominant over randomness in interpreting the results. In addition, fuzziness can be used by decision-makers to identify missing variables to help in interpreting the results. Price of labor, price of capital, and market-share were found to be the significant factors in measuring bank efficiency. Managerial implications are addressed.