Ranking of the Lithuanian Banks During the Recession of 2008-2009 by the MULTIMOORA Method

May 18, 2014 Posted by admin

Willem Karel M. Brauers, Romualdas Ginevicius and Askoldas Podvezko
Faculty of Applied Economics, University of Antwerp, Prinsstraat, 13, 2600, Antwerpen Belgium and Vilnius Gediminas Technical University, Lithuania,Department of Enterprise Economics and Business Management, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT, 10223, Vilnius, Lithuania,

Abstract
The aim of this study is to do a critical analysis, on the basis of different objectives, the banks registered in Lithuania during the recession years 2008-2009. As these banks work in the same macro-economic environment, the objectives are chosen on the basis of the CAMEL classification (‘C’ Capital adequacy, ‘A’ Asset quality, ‘M’ Management quality, ‘E’ Earnings, ‘L’ Liquidity). Traditional Cost-Benefit Analysis is not suitable enough for this. Indeed Cost-Benefit analysis translates all direct and indirect costs and other objectives (benefits) into money terms. On the contrary, Multi-Objective Optimization takes care of the different objectives, with objectives keeping their own units. Different methods exist for the application of Multi-Objective Optimization. In our research, we tested these methods for their robustness. MOORA (Multi-Objective Optimization by Ratio analysis) and MULTIMOORA (MOORA plus a Full Multiplicative Form), showed positive results on these tests. Therefore MULTIMOORA was chosen for the ranking of the Lithuanian Banks during the recession years 2008-2009.

Keywords: Multi-objective optimization, Lithuanian banks, bank objectives, robustness, ratio system, Reference point method, Full multiplicative form.

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