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An MCDA composite index of bank stability using CAMELS ratios and shannon entropy

Sabri Boubaker Orcid Logo, Thanh Ngo Orcid Logo, Aristeidis Samitas, David Tripe

Annals of Operations Research

Swansea University Author: Sabri Boubaker Orcid Logo

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DOI (Published version): 10.1007/s10479-024-06023-3

Abstract

This study uses the multi-criteria decision-analysis (MCDA) approach to construct a composite performance index (CPI) directly from the CAMELS financial ratios. The CPI has several promising characteristics, such as (i) being an absolute measure of performance that allows for adding or removing data...

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Published in: Annals of Operations Research
ISSN: 0254-5330 1572-9338
Published: Springer Science and Business Media LLC 2024
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URI: https://cronfa.swan.ac.uk/Record/cronfa67512
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first_indexed 2024-10-30T13:38:07Z
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spelling v2 67512 2024-09-02 An MCDA composite index of bank stability using CAMELS ratios and shannon entropy 43999fff86cd8a29f4815fb4dfa47729 0000-0002-6416-2952 Sabri Boubaker Sabri Boubaker true false 2024-09-02 CBAE This study uses the multi-criteria decision-analysis (MCDA) approach to construct a composite performance index (CPI) directly from the CAMELS financial ratios. The CPI has several promising characteristics, such as (i) being an absolute measure of performance that allows for adding or removing data without affecting the existing scores; (ii) employing CAMELS ratios directly in its calculation without the need for normalization or imputation of positive values; (iii) employing the dynamic weighting system of data envelopment analysis (DEA); (iv) providing more robust insights on the Vietnamese banking system under the Shannon entropy approach; and (v) can be an alternative measure of bank stability, compared to the CAMELS ratings and z-scores. Based on a rich dataset of 45 Vietnamese banks spanning from 2002 to 2020, our findings suggest that the proposed CPI could offer an overall view consistent with other approaches for measuring banking sector performance and stability and identifying specific strengths and weaknesses of banks. Journal Article Annals of Operations Research 0 Springer Science and Business Media LLC 0254-5330 1572-9338 Composite performance index; Multi-criteria decision-analysis (MCDA); Data envelopment analysis; CAMELS; Shannon entropy; Vietnamese banks 9 5 2024 2024-05-09 10.1007/s10479-024-06023-3 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University Other Open Access funding enabled and organized by CAUL and its Member Institutions 2024-10-30T13:39:47.4400002 2024-09-02T14:57:18.8799459 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Sabri Boubaker 0000-0002-6416-2952 1 Thanh Ngo 0000-0002-6090-8067 2 Aristeidis Samitas 3 David Tripe 4 67512__32797__656cd3f179d24656a02fe543b54b3af2.pdf 67512.VoR.pdf 2024-10-30T13:38:33.0772676 Output 2140508 application/pdf Version of Record true © The Author(s) 2024. This article is licensed under a Creative Commons Attribution 4.0 International License. true eng http://creativecommons.org/licenses/by/4.0/
title An MCDA composite index of bank stability using CAMELS ratios and shannon entropy
spellingShingle An MCDA composite index of bank stability using CAMELS ratios and shannon entropy
Sabri Boubaker
title_short An MCDA composite index of bank stability using CAMELS ratios and shannon entropy
title_full An MCDA composite index of bank stability using CAMELS ratios and shannon entropy
title_fullStr An MCDA composite index of bank stability using CAMELS ratios and shannon entropy
title_full_unstemmed An MCDA composite index of bank stability using CAMELS ratios and shannon entropy
title_sort An MCDA composite index of bank stability using CAMELS ratios and shannon entropy
author_id_str_mv 43999fff86cd8a29f4815fb4dfa47729
author_id_fullname_str_mv 43999fff86cd8a29f4815fb4dfa47729_***_Sabri Boubaker
author Sabri Boubaker
author2 Sabri Boubaker
Thanh Ngo
Aristeidis Samitas
David Tripe
format Journal article
container_title Annals of Operations Research
container_volume 0
publishDate 2024
institution Swansea University
issn 0254-5330
1572-9338
doi_str_mv 10.1007/s10479-024-06023-3
publisher Springer Science and Business Media LLC
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
active_str 0
description This study uses the multi-criteria decision-analysis (MCDA) approach to construct a composite performance index (CPI) directly from the CAMELS financial ratios. The CPI has several promising characteristics, such as (i) being an absolute measure of performance that allows for adding or removing data without affecting the existing scores; (ii) employing CAMELS ratios directly in its calculation without the need for normalization or imputation of positive values; (iii) employing the dynamic weighting system of data envelopment analysis (DEA); (iv) providing more robust insights on the Vietnamese banking system under the Shannon entropy approach; and (v) can be an alternative measure of bank stability, compared to the CAMELS ratings and z-scores. Based on a rich dataset of 45 Vietnamese banks spanning from 2002 to 2020, our findings suggest that the proposed CPI could offer an overall view consistent with other approaches for measuring banking sector performance and stability and identifying specific strengths and weaknesses of banks.
published_date 2024-05-09T13:39:45Z
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score 11.037166

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