From operational efficiency to financial efficiency

Abstract

Purpose

The purpose of this paper is to assess the conceptual relationship between operational, competitive market and financial performance of a company.

Design/methodology/approach

A model presented is designed on hand data envelopment analysis (DEA) and causal loop diagram (CLD).

Findings

Some of the paper's findings are that: a company which is located closer to the operational frontier will also be located closer to the market frontier; a company which is located closer to the market frontier will also be located closer to the financial frontier; the relationship of operational performance on financial performance is no weaker than that of market performance; firm‐specific financial risk is more influenced by such variables as quality, speed and flexibility than by cost‐related variables.

Originality/value

There are various papers about efficiency frontier analysis with DEA tools separately, but few about performance, market and financial frontier integrated using DEA and CLD. Unlike many quantitative papers, this paper uses DEA and CLD to analyze the conceptual relationship between operational, competitive market and financial performance of a company.

Citation

Kanghwa, C. (2010), "From operational efficiency to financial efficiency", Asian Journal on Quality, Vol. 11 No. 2, pp. 137-145. https://doi.org/10.1108/15982681011075943