Best-practice benchmarking in UK higher education: New nonparametric approaches using financial ratios and profit efficiency methodologies

Abstract

The neglected issue of using profit efficiency for the best-practice benchmarking of UK universities is explored to see whether this supports the policy stance of encouraging more specialised university production. The paper also investigates whether nonparametric modelling with financial ratios, in contrast to nonparametric modelling based on the prices and quantities of each university’s inputs and outputs, can yield ready insights into this profit efficiency issue. The empirical results, using two new approaches, confirm that more specialised university production yields relatively higher performance on average than less specialised production. The results also highlight certain advantages of financial ratios modelling.