feng3

DEA is a widely applied approach for measuring the relative efficiencies of a set of decision making units DMUs, Links of London uses multiple inputs to produce multiple outputs. It has been proven to be an effective tool for performance evaluation and benchmarking since it was first introduced by Chames et al. Chames et al. based their work on the seminal paper by Farteli , and is a nonparametric method of efficiency analysis. The method has two advantages. First, it is used to evaluate the relative efficiency of a set of comparable entities with making simultaneous use of multiple inputs and outputs. And second, the method does not require assumptions regarding the shape of the production frontier. After Chames et al. a number of different DEA models have been proposed e.g. Banker et al. Seiford, Wu et al. Lin Links of London Power Walk Charm al.and these models have wide applications in various performance evaluation problems. Traditionally, the application of financial ratios helps the evaluation of bank performance. Accounting ratios may be used in order to interpret financial accounts or management accounting data. Halkos and Salamouris showed that two main reasons for using ratios as a tool of analysis are to allow comparison among different sized bank and to control for sector characteristics permitting the comparison of individual bank's ratios with some benchmark for the sector. Furthermore, Emel et al. presented that one of links of london sale fields in which formal or mathematical modeling of finance theory has found widespread application is risk assessment. In the literature, risk is usually evaluated by a function of expected profit and its standard deviation. The method is considered that the probability distribution depends on the parameter e.g. Flannery, Gizycki, Ennis and Malek. However, a bank's financial information plays a vital role in decision making of credit risktaking activities. Extensive literatures dedicated to the prediction of business failure as well as credit scoring concepts have emerged in recent years e.g. Mingo, Brown and Wang, Carling et al. Financial ratios are among the most popular and widely used tools of financial analysis. They provide us with clues and symptoms of underlying conditions and have been found useful in predicting business failure Links of London Bangles.g. Huang et al. Zhao et al. Yeh et al. In this paper, we employ financial ratios to assess and measure credit risk and profitability of a bank. Then we use DEA approach in conjunction with financial ratios to evaluate the credit risk efficiency of a bank.