OPERATIONAL EFFICIENCY ASSESSMENT OF PENSION FUND MANAGEMENT COMPANIES

Abstract

The aim of the research is to assess operational efficiency of pension fund management companies by using dedicated efficiency assessment methodology and analyse implications brought by the efficiency assessment. The efficiency assessment methodology employed is Data Envelopment Analysis (DEA). The pension fund management companies subject to operational efficiency assessment are the ones operating in Baltic countries Estonia, Latvia and Lithuania. The general research period is 2009-2013. The operational efficiency within the given research is defined as ability of a pension fund management company to generate profit before interest and taxes (i.e. efficiency model output variable) by using commission and administration expenses (i.e. efficiency model input variables). Because a pension fund management business might be dependent on economies of scale and, to a lesser extent, economies of scope, fund management companies are grouped by using a cluster analysis performed on the basis of assets under management and a share of non-pension fund management revenue in order to improve comparability of efficiency findings. Methods used in the empirical part of the research to process above mentioned data are mathematical programming, including DEA as well as main trend analysis, cluster analysis, development indicators, relative and absolute indicators and other methods.

The research outcome is assignment of operational efficiency ranks as well as average indicators for pension fund management companies operating in the chosen Baltic countries during the time period 2009-2013 with subsequent discussion of implications efficiency measurement methodology and other analyses performed bring to findings of the research.