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Measuring performance by integrating k-medoids with DEA: Mongolian case

    Batchimeg Bayaraa   Affiliation
    ; Tibor Tarnoczi   Affiliation
    ; Veronika Fenyves   Affiliation

Abstract

Performance measurement encourages Decision Making Units (DMUs) to improve their level of performance by comparing their current financial positions with that of their peers. Data Envelopment Analysis (DEA) is a widely used approach to performance measurement, though it is susceptible when the data is heterogeneous. The main objective of this study is to examine the performance of Mongolian listed companies by combining DEA and a k-medoid clustering method. Clustering facilitates the characterization and patterns of data and identification of homogenous groups. This study applies the integration of k-medoids and performance measurement. The research used 89 Mongolian companies’ financial statements from 2012 to 2015 - obtained from the Mongolian Stock Exchange website. The companies are grouped by k-medoids clustering, and efficiency of each cluster is evaluated by DEA. According to the silhouette method, the companies are classified into two clusters which are considered first cluster as small and medium-sized (80), and second cluster as big (9) companies. Both clusters are analyzed and compared by financial ratios. The mean efficiency score of big companies’ is much higher than that of small and medium-sized companies. Integrated results show that cluster-specific efficiency provides better performance than pre-clustering efficiency results.

Keyword : financial performance, k-medoids clustering, data envelopment analysis, input efficiency, variable return to scale, decision making unit

How to Cite
Bayaraa, B., Tarnoczi, T., & Fenyves, V. (2019). Measuring performance by integrating k-medoids with DEA: Mongolian case. Journal of Business Economics and Management, 20(6), 1238-1257. https://doi.org/10.3846/jbem.2019.11237
Published in Issue
Oct 14, 2019
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This work is licensed under a Creative Commons Attribution 4.0 International License.

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