![]() In this paper, we assess the efficiency profiles of UK commercial banks. In fact, poor performance often leads to distress which might lead to bankruptcy under some circumstances along with substantial financial, economic and social undesirable consequences. Because of the crucial importance of banking systems to the economy and the financial risks they face, banks are required to comply with both national and international regulations, and their performance is constantly monitored by both regulatory bodies and investors. Nowadays, banks have a diversified portfolio of activities that range from personal, corporate and investment banking to trading of currency, commodities, and financial securities on stock markets. Banks make profits in exchange for their services including risk management. Banks play an important role in money supply and the efficient allocation of financial resources in an economy. Banks are at the heart of financial systems in that they act as financial intermediaries to be more specific, they borrow money by accepting deposits and issuing debt securities, and lend money both directly to their customers and indirectly through capital markets by investing in debt securities. The banking sector plays a crucial socio-economic role at the regional, national and international levels. Furthermore, in general, a linear regression-based feedback mechanism proves effective at improving discrimination in DEA analyses unless the initial choice of inputs and outputs is well informed. On the other hand, DEA analyses with and without a linear regression-based feedback mechanism seem to provide consistent findings however, in general DEA analyses without feedback tend to over- or under-estimate efficiency scores depending on the orientation of the analyses. Empirical results suggest that, on average, the commercial banks operating in the UK-whether domestic or foreign-are yet to achieve acceptable levels of overall technical efficiency, pure technical efficiency, and scale efficiency. We use the proposed framework to address several research questions related to both the efficiency of the UK commercial banking sector and DEA analyses with and without regression-based feedback. So far, the UK banking sector remains relatively under researched despite its crucial importance to the UK economy. Unlike previous studies, the DEA models used within the proposed framework could use both inputs and outputs, only inputs, or only outputs. In this paper, we propose a new DEA-based analysis framework with a regression-based feedback mechanism, where regression analysis provides DEA with feedback that informs about the relevance of the inputs and the outputs chosen by the analyst. Data envelopment analysis (DEA) has witnessed increasing popularity in banking studies since 1985.
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