Abstract
This paper introduces a Mixed Marginal Rates of Substitution (MMRS) approach for analyzing banking efficiency within a linear programming framework. For this purpose, a linear programming model is proposed that efficiently calculates Marginal Rates, revealing how partial input changes affect multiple outputs simultaneously. Applying this methodology to data from the Taiwanese banking system spanning 2010 to 2020 reveals diverse efficiency patterns across financial institutions. The analysis demonstrates that while increased financial inputs generally improve outputs, individual banks exhibit varying sensitivity to these changes. Some institutions were resilient to input fluctuations, while others showed marked sensitivity, particularly in loans and investments. As a result, the proposed MMRS framework provides a robust tool for analyzing indicator relationships within efficient units, offering valuable insights for tailored management strategies and policy formulation in the banking sector. The findings emphasize the importance of institution-specific approaches to enhancing banking efficiency and managing risk effectively, contributing to a more nuanced understanding of economic outcomes in the financial industry. Additionally, symmetry concepts in input–output relationships are suggested as a potential area for future research, offering a possible framework for identifying balanced efficiency patterns among banks.
Published Version
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