In this paper we present a new benchmark methodology which explains the differences in level of the rate of return on assets between two firms. Our approach is developed in an economic context given by the neoclassical theory of the firm. The difference between the benchmark firm's return on assets and that of another firm in the industry is explained by five effects: prices, operating efficiency, scale, input mix and output mix. These effects are calculated using linear programming techniques based on Data Envelopment Analysis (DEA). Also, we propose a new definition of a firm's size. We show an application of this methodology to the case in the Spanish banking sector.
|Journal||Cuadernos de Economia y Direccion de la Empresa|
|Publication status||Published - 1 Aug 1998|