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Please use this identifier to cite or link to this item: https://dspace.lboro.ac.uk/2134/4200

Title: Efficiency and Malmquist indices of productivity change in Indonesian banking
Authors: Hadad, Muliaman D.
Hall, Maximilian J.B.
Kenjegalieva, Karligash
Santoso, Wimboh
Satria, Ricky
Simper, Richard
Keywords: Indonesian finance and banking
Productivity
Efficiency
Issue Date: 2008
Publisher: © Loughborough University
Series/Report no.: Loughborough University. Department of Economics. Discussion Paper Series;WP 2008 - 08
Abstract: In this study we utilise a non-parametric, slacks-based model (SBM) approach to analyse efficiency and productivity changes for Indonesian banks over the period January 2006 to July 2007. Efficiency scores and Malmquist productivity indices are estimated using the approach for efficiency and super-efficiency estimation suggested by Tone (2001, 2002). Additionally, the Malmquist indices are decomposed into technical efficiency change and technological shift components. Using monthly supervisory data provided by Bank Indonesia we find that, under the intermediation approach to efficiency estimation, average bank efficiency was reasonably stable during the sample period, ranging between 70% and 82%, with 92 of the 130 banks in existence at that time having efficiency scores of over 70%, including 10 with (super)efficiency scores above unity. We also find that technical efficiencies under the Intermediation approach to describing the banking production process are relatively stable. Malmquist results for the industry suggest that the main driver of productivity growth is technological progress. A strategy based on the gradual adoption of newer technology, according to our results, thus seems to have the highest potential for boosting the productivity of the financial intermediary operations of Indonesian banks.
Description: This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2008_08.html
Version: Published
URI: https://dspace.lboro.ac.uk/2134/4200
ISSN: 1750-4171
Appears in Collections:Working Papers (Economics)

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