Benchmarking firm performance from a multiple-stakeholder perspective with an application to Chinese banking

TLDR: In this paper, the authors use data envelopment analysis (DEA) to capture the interactions among different perceptions on a common set of performance measures, and demonstrate that different views from the stakeholder universe can be summarily captured in DEA scores.

Abstract: We know very little about how a firm would compare against its peers when evaluated from a multiple-stakeholder perspective where the same variables are interpreted differently. Since most medium-to-large organizations acknowledge the multi-dimensional nature of their operations, finding out the performance evaluations of various stakeholders can inform managerial decision-making. Thus, the main motivation for this study is to capture the interactions among different perceptions on a common set of performance measures. Using data envelopment analysis (DEA), we work with an approach that allows a flexible designation of inputs and outputs based on varying perspectives of five key stakeholders in banking. The versatile approach demonstrates that different views from the stakeholder universe can be summarily captured in DEA scores. A numerical example on Chinese commercial banks identifies the compliant (efficient) banks versus rigid (inefficient) banks, as well as the amenable stakeholders (those evaluating banks as efficient) versus the recalcitrant stakeholders (those evaluating banks as inefficient). The aligned views held by management and shareholders as evidenced by significant correlation among performance rankings imply reduced agency costs. Similarly, shared perceptions between customers and employees may encourage management to examine how this important business interface can be improved.