Efficiency evaluation of the pension funds: Evidence from India

Abstract

The purpose of this article is to investigate the technical efficiency of Indian pension funds using data envelopment analysis (DEA) and to assess the reasons of inefficiency if any. This article analyzes the efficiency performance of all the pension funds available to Indian subscribers from the year 2015–2019 using radial measurers (BCC) of DEA based on secondary data collected from the annual reports of New Pension System Trust. Findings indicate that the average efficiency of Indian pension funds was 75.38% and this sector experienced overall stability in the average efficiency levels during the study period. Almost 40% of the pension funds operated efficiently in one or more years during the study period. The minimum slack was found in the input “expense ratio.” This confirms that risk associated with investments is the cause of inefficiency and not the expense ratio in the Indian pension sector. Tobit regression is applied to explore the main drivers of efficiency in the India pension funds. The study finds that fund size has positive association with the efficiency of the pension funds. Public sector funds were more efficient than the private sector funds. This study is first of its kind that has assessed the efficiency of Indian pension funds. The study brings into light the operating characteristics and efficiencies of the Indian pension funds for the period 2015–2019 and therefore holds important insights for policy makers, practitioners, and decision‐makers.

Measuring the Efficiency of Index Funds: Evidence From India

“…This demonstrates that the inefficiency of the Index funds is due to investment risk. The "mean-variance efficiency theory" is supported by this (Sengupta and Zohar, 2001;Sengupta, 2003, Siddiqui, 2021.…”

“…This was larger than the 3.45 percent observed in the financial year 2020-21 when there was zero relative mean slack in the expense ratio. The "mean-variance efficiency hypothesis" is supported by many studies (Sengupta and Zohar, 2001;Sengupta, 2003;Siddiqui, 2021). According to this hypothesis, the associated risk is the cause of the funds' inefficiency not the associated expenses.…”

How Profit Efficient is Indian Life Insurance Industry: A DEA Study

“…The next phase has been an analysis of firm-related factors that affect the expense and return effectiveness of a life insurance company. Since the efficacy numbers vary between 0 and 1, the present research additionally employed the Tobit regression, like most of the prior research (Rubio-Misas, 2022; Siddiqui, 2022).…”

“…The size of the company (natural log of fixed assets), the ratio of solvency (the percentage of equity capital to total assets), the claims ratio (the proportion of claims to total premiums), and the ownership arrangement (dummy, 1 for public insurance firms, 0 for private life insurance companies). Following in the wake of prior research (Ariff & Can, 2008; Chakraborty et al, 2012; Siddiqui, 2022), the distribution ratio (percentage of the compensation received to the sum of the expenses spent) and market share (a percentage in all premiums issued) were selected as independent factors in this analysis. Here is a display of the calculated Tobit regression model.…”