ESTIMATING ECONOMIC EFFICIENCY UNDER RISK FOR AGRICULTURAL COOPERATIVES
Journal Title: International Journal of Food and Agricultural Economics - Year 2019, Vol 7, Issue 2
Abstract
This study examined the impact of downside risk on cost efficiency (CE) and revenue efficiency (RE) for a sample of agricultural cooperatives. Downside risk is an appropriate measure of risk as it accounts for loss below the target return level regardless of individuals’ risk preference. The semi-variance of return on equity was used a measure of downside risk. CE and RE were estimated using data envelopment analysis (DEA) without adjusting for downside risk and then re-estimated adjusting for downside risk. The average CE and RE scores were higher with the inclusion of downside risk than the scores without downside risk. The DEA method without accounting for risk overestimates inefficiency and may misguide managers on adjustments needed to improve performance.
Authors and Affiliations
Krishna Prasad Pokharel, Allen M. Featherstone Featherstone, David W. Archer
Keywords
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