A STUDY ON PERFORMANCE EVALUATION OF PUBLIC SECTOR ENTERPRISE STEEL COMPANIES USING SHANNON DEA APPROACH

Abstract

This paper examined the overall efficiency of the public sector enterprise Steel companies using a non-parametric approach during financial year 2010-11 to 2013-14. Using the Shannon entropy method, the efficiency scores of public sector enterprise steel companies under cost, revenue and profit models are combined to obtain a comprehensive performance measure. Results of degree of diversification and degree of importance associated with each model suggest that profit model has a larger value of discriminatory ability and weight compared to cost and revenue models. Firms which are close to profit and cost efficient frontiers are ranked better under Shannon index compared to those which are away from the efficient frontiers. In general, firms which are closed to efficient frontier are ranked better compared to those which are away from the efficient frontier under Shannon index. Finally, this paper pointed out that Shannon-DEA approach provides a comprehensive efficiency index for firms as well as a reasonable way of ranking the companies.