A Multiple-Stakeholder Perspective on Bank Performance Measurement

Abstract

The dominance of financial ratios used by market analysts and the absence of a more holistic approach to evaluating bank performance motivates this study. The primary objective of the article is to illustrate how to develop a multiple stakeholder perspective (MSP) on a common set of financial ratios using a cross-country survey and reflect this information in a single comparative bank performance estimate. Data Envelopment Analysis (DEA) brings together the varying perspectives of five key stakeholders, namely, regulators, shareholders, customers, bank managers and employees. We develop the MSP approach by taking advantage of a recent online survey of stakeholder perceptions on key financial ratios across the major trading partners Australia, China and Japan. We focus on publicly quoted commercial banks. Key research questions demonstrated are (1) which banks are considered efficient by all the stakeholder groups? (2) which banks are considered inefficient by all the stakeholder groups? (3) which stakeholder group is most frequently evaluating the banks as inefficient (4) which stakeholder group is most frequently evaluating the banks as efficient? (5) how does the ranking of Australian banks change when their performance is viewed from the perspectives of Chinese or Japanese stakeholders? (6) how does the ranking of Chinese banks change when their performance is viewed from the perspectives of Australian or Japanese stakeholders? (7) how does the ranking of Japanese banks change when their performance is viewed from the perspectives of Australian or Chinese stakeholders? Insights gained through MSP can guide regulatory vigor, promotional or public relations activities, raising of equity capital in overseas markets and other cross-border operations such as positioning a bank’s international presence in a host country.