Abstract
Financial performance evaluation is a central focus for any entity, such that areas needed to improve can be identified and necessary measures can be taken to avoid huge losses. Global competition is making businesses to go for advanced measures of performance rather than depending on traditional performance measurements like financial ratios. Data envelopment analysis is the widely used technique to assess the efficiency level. The major purpose of this paper is to analyze the influence of input and output variables on the efficiency score. Overall technical, pure technical, scale and super efficiency has been determined for the ten sub-sectors in Indian manufacturing based on financial information for the period 2009–10 to 2013–14. Study incorporates two different set of input and output variables to determine various efficiency score. It is found in the study that there is a significant difference in the efficiency score for some sub-sectors measured using these two different set of input and output variables throughout the period of study. Further, study also highlights that ranking order of sub-sectors based on efficiency score differ significantly for these two set of input and output variables. Thus, this study highlights the role and importance of selection of input and output variables for the determination of efficiency using data envelopment analysis.
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