The Technical Efficiency of Russian Retail Companies: An Empirical Analysis

Abstract

This study focuses on the technical efficiency analysis of Russian retail companies over the period 2011–2015. The main objective is to assess technical efficiency and to reveal factors that affect the efficiency and creditworthiness of this important sector of the Russian economy. Efficiency can be considered a basic measure of creditworthiness because it demonstrates management’s ability to maximise its use of resources. Studying the results enables banks to consider creditworthiness and determine whether to provide retailers with funding for future development. The empirical analysis for this article was performed using Data Envelopment Analysis and Stochastic Frontier Analysis methods. Two differing methods can be used to evaluate technical efficiency. The first, SFA, presents a picture of the whole market and formulates general propositions on the creditworthiness of retail companies. The other method, DEA, looks at certain companies and their relative performance in comparison with their competitors. Banks can use a technical efficiency score to monitor the dynamics and potential of each company. In addition to examining tools for evaluating technical efficiency, the study also has practical implications for managers of retail companies in Russia.