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ABSTRACT: Theories of regulation have generally been tested by using a regression approach or an an event study approach. This paper was inspired by the Coase (1937) theory of the firm. It used Data Envelopment Analysis (DEA) to test the economic consequences of the Occupational Health and Safety Administration (OSHA) cotton dust standards by comparing the managerial efficiency of the firms affected by the cotton dust for the years before and after the US Supreme Court upheld the decision in 1981. Accounting inputs of common equity, total assets, and production costs were minimized while the total revenue was maximized. Controlling for the effects of imports for consumption providing for asymmetric disadvantages to US firms, we found that surviving firms had become more productively efficient during the post regulatory period as predicted. Apparently, these firms were able to accommodate the dust standard, reduce costs, and improve the operating efficiency of these firms simultaneously. These results indicate the usefulness of DEA as an alternative method of testing the theories of regulation.
Revenue & Yield Management eJournal. 08/2008;
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ABSTRACT: This paper was inspired by the Coase (1937) theory of the firm. The purpose of this paper is to show the applicability of data envelopment analysis (DEA) in arriving at an unbiased account of relative performance of a set of companies, using the pharmaceutical industry as an example. A DEA based income efficiency measure of business performance for the pharmaceutical industry is computed. The pharmaceutical industry, which includes many multinational corporations with complex governance problems and strategies that allowed the efficiency to change over time, over ten recent years, are analyzed. The analyses indicate that inclines and declines in DEA efficiency rankings are related to the strategic choices made by the upper management. This approach may be ideal to evaluate strategic managers (CEOs, general managers, and presidents) by the board of directors since it relates multiple performance indices to a meta measure of performance. Another group of beneficiaries include the sector analysts. Our approach adds a new dimension to sector analysis, to compare specific industries and identify the relative performance of firms on multiple performance indices.
Revenue & Yield Management eJournal. 08/2008;
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ABSTRACT: Ratio analysis is a commonly used analytical tool for verifying the performance of a firm. While ratios are easy to compute, which in part explains their wide appeal, their interpretation is problematic when two or more ratios provide conflicting signals. Indeed, ratio analysis is often criticized on the grounds of subjectivity, that is the analysts must pick and choose ratios in order to asses the overall performance of a firm.In this paper, we demonstrate that Data Envelopment Analysis (DEA) can augment the traditional ratio analysis. DEA can provide a consistent and reliable measure of the managerial or operational efficiency of the firm. We test the null hypothesis that there is no relationship between DEA and traditional accounting ratios as a measure of performance of a firm. Our results reject the null hypothesis indicating that DEA can provide information to analysts that is additional to that provided by the traditional ratio analysis. We illustrate the application of DEA to the oil and gas industry to demonstrate how financial analysts can employ DEA as a complement to ratio analysis.
Operations Research eJournal. 08/2008;
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ABSTRACT: We demonstrate the usefulness of Data Envelopment Analysis (DEA) as an analytical procedure for auditors, especially in the planning stage of the audit, to determine the extent of audit and to assess the preliminary risk level of the client. DEA based analytical procedures can provide consistent and reliable red flags and benchmarks for auditors to compare a client to other firms in the same industry. We provide an illustrative use of DEA as an analytical procedure for auditing a client in the oil and gas industry.
Revenue & Yield Management eJournal. 07/2008;
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ABSTRACT: This paper analyzes the United Nations Organization's Kyoto Protocol nations to address two questions. First, what are the environmental production efficiency rankings of these nations? Second, is there a relationship between a nation's ratification status and its environmental production efficiency ranking? Our findings suggest that the nations that have ratified the Kyoto Protocol are more likely to be environmentally production efficient as compared to the nations that have not ratified the Protocol.
Journal of Environmental Management 07/2008; 90(2):1178-83. · 3.24 Impact Factor
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ABSTRACT: This study demonstrates that data envelopment analysis (DEA) can be a useful tool to assess the relative efficiencies of water supply systems and to establish benchmarks with which to measure progress in the management of water resources. Frontier efficiency models measure the efficiency of water use in the Palestinian Territories (West Bank and the Gaza Strip). At the municipality level, sufficient data for the years 1999-2002 were available to estimate efficiency and stability scores. The Gaza Strip efficiency scores were considerably lower than those of the West Bank. Water losses were the major source of the inefficiency as indicated by the large slacks of this input. The relative sizes of the municipalities affect efficiency scores little. Palestinian policy makers should focus on rebuilding the infrastructure of the water networks, beginning with the most DEA inefficient municipalities in order to minimize water losses.
Journal of Environmental Management 05/2008; 87(1):80-94. · 3.24 Impact Factor
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ABSTRACT: In this paper we examine the governance of a Chinese state-owned enterprise (SOE) and try to highlight accounting environment in the People's Republic of China (PRC). We look at the operational aspect of the Qingtongxia Aluminum Smelter Corporation, and try to shed light on the role of accounting in decision-making process in this vibrant economy.
International Journal of Managerial and Financial Accounting 02/2008; 1(1):64-74.
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ABSTRACT: Purpose – The purpose of this paper is to show the applicability of data envelopment analysis (DEA) in arriving at an unbiased account of relative performance in a set of companies, using the pharmaceutical industry as an example. Design/methodology/approach – A DEA-based income efficiency measure of business performance for the pharmaceutical industry is computed. The pharmaceutical industry, which includes many multinational corporations with complex governance problems, and the strategies that allowed firm efficiency rankings to change over time, over ten recent years, are analyzed. Findings – The analyses indicate that the inclines and declines in DEA efficiency rankings are related to the strategic choices made by the upper management. Research limitations/implications – The paper attempted to trace firm behavior post hoc to validate the DEA rankings. All relevant firm behavior may not have been captured; the paper only attempted to capture behavior reported in the respectable business press, which may introduce a bias. Practical implications – The approach may be ideal to evaluate strategic managers (CEOs, general managers, and presidents) by board of directors, since it relates multiple performance indices to a meta-measure of performance. Another group of beneficiaries include sector financial analysts. The approach adds a new dimension to sector analysis, to compare specific industries and identify the relative rankings of firms on multiple performance indices. Originality/value – The paper demonstrates the usefulness of DEA in performance governance measurement by applying it to the pharmaceuticals industry.
Review of Accounting and Finance. 01/2008; 7(May):121-130.
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ABSTRACT: Productivity studies generally compare the Solow residuals for the more developed countries such as the OECD countries. 1 In this paper we follow up on the frontier estimation approach of Fare, Grosskopf, Norris and Zhang (1994) to 17 OECD countries, and develop a generalized efficiency index for a much larger set of 57 countries both developed and underdeveloped by employing measures of per capita gross national product and resource availability indicators compiled by the World Bank and other international institutions. Using a Data Envelopment Analysis (DEA) based linear programming approach, we maximize the components of per capita GDP subject to minimizing specific resource intensity measures. Because DEA provides a units invariant comparison of relative efficiency, this programming approach yields a ranking of the most robustly efficient to the most robustly inefficient countries. As expected the more developed countries tend to be more robustly efficient, but intriguing contras...
10/2000;
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ABSTRACT: Ratio analysis and account balance comparisons are commonly used analytical tools to verify the performance of a client in an audit engagement. While ratios are easy to compute, which in part explains their wide appeal, their interpretation is problematic, especially when two or more ratios provide conflicting signals. Indeed, ratio analysis is often criticized on the grounds of subjectivity, i.e., the auditor must pick and choose ratios in order to assess the overall performance of a client. In this paper we argue that Data Envelopment Analysis (DEA) can augment the traditional ratio analysis. DEA can provide a consistent and reliable measure of managerial or operational efficiency of the client. We test the null hypothesis that there will be no relationship between DEA and traditional accounting ratios as measures of performance of a client. Our results reject the null hypothesis indicating that DEA can complement accounting ratios in analysis of the overall performance of the client...
10/1999;
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ABSTRACT: "Inspired by the Coase (1937) theory of the firm, we analyze the performance of Healy, Palepu, and Ruback (1992) sample of merged firms over a ten-year period using a managerially controlled efficiency measure, data envelopment analysis (DEA). Our individual, firm-level, year-by-year analyses indicate that the managerial performance of the merged firms generally improved in the post merger period as documented in the extant studies of mergers and acquisitions. However, there were also significant number of cases where we could not observe the improved managerial efficiency using this disaggregated approach. We conclude that the DEA based disaggregated approaches are useful tools in the hands of corporate governance boards with an interest in yearly or even quarterly managerial performance at the individual firm level."
