VCS and CVS: New combined parametric and non-parametric operation research models

Abstract

The constancy of efficacy derived from parametric and non-parametric is not significant, this paper provides a scientific assessment and proposes two novel combined parametric and non-parametric operation research models, which will be a new experiment in literature perception. A scientific assessment of banks based on two novel optimizations VRS-CRS-SFA (VCS) and CRS-VRS-SFA (CVS) as the combination of the efficiency measurement method of CCR(Charnes, Cooper and Rhodes model) or CRS(Constant Return to Scale), BCC(Banker, Charnes, and Cooper model) or VRS(Variable Return to Scale) in Data Envelopment Analysis (DEA), as well as Stochastic Frontier Approach (SFA) for 65 banks during Feb to July 2020 are introduced. For analyzing the performance of the parametric and non-parametric approaches, we have considered the linear regression and Unreplicated Linear Functional Relationship (ULFR). Finally, the superior bank and the best performance model are introduced. For more clarification, three different approaches, which are production, intermediation, and profit/revenue in financial institutions, are considered. Among the proposed techniques, the two novel recommended VCS and CVS compared with BCC-CCR, CCR-BCC, and SFA models, in all of the three suggested approaches have a more positive correlation with profit risk and show the higher coefficient of determination values.