Incorporating the Credit Ranking Measure to Evaluate the Operating Efficiency of Financial Holding Companies in Taiwan

One hears that the credit ranking score has increased technical efficiency in financial holding companies, when a data envelopment analysis (DEA) is employed. Our empirical results show that the credit ranking scores will obviously affect the estimated results of efficiency measurement in Taiwan’s financial holding companies. Additionally, the effects on technical inefficiency could be attributed to the under-utilization of inputs, rather than the inappropriate returns of scale, or the selection of incorrect input combinations. It shows that the pure technical efficiency change index number and the scale efficiency change index number are still improvement. Especially, when credit ranking score is incorporated as an important factor for efficiency measure, the credit ranking measure can be viewed as a discretionary variable for inputs.