Operational efficiency and its determinants of Indian food and beverages industries: a DEA approach

TLDR: In this paper, the operational efficiency of the food and beverages industry is determined by identifying the technical and scale efficiencies by applying data envelopment analysis (DEA) models, which is used to estimate the causal relationship between operational efficiency and the other chosen variables.

Abstract: The operational efficiency of the food and beverages industry is determined by identifying the technical and scale efficiencies by applying data envelopment analysis (DEA) models. A set of 46 companies with average data collected for the year 2005-2006 to 2009-2010 is used for the study. The analysis begins with a benchmark study, followed by identification of peers and their followers. Nine firms emerge as peers. The slacks of the inefficient firms are identified. Regression analysis is used to estimate the causal relationship between operational efficiency and the other chosen variables. Analyses of peer firms are conducted to identify the influencing variables of the peer firms. The first stage DEA analysis reveals that the inefficiencies such as scale and technical inefficiencies exist in the Indian food and beverages industry and a majority of inefficient firms are operating in the increasing returns to scale region. The second stage analysis using the OLS regression to identify the determinants of these inefficiencies reveals that current ratio and financial assets to total assets are contributing significantly to the inefficiencies.