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Title: Banking efficiency and stock market performance: an analysis of listed Indonesian banks
Authors: Hadad, Muliaman D.
Hall, Maximilian J.B.
Kenjegalieva, Karligash
Santoso, Wimboh
Satria, Ricky
Simper, Richard
Keywords: Indonesian banking
Emerging markets
Productivity
Efficiency
Issue Date: 2008
Publisher: © Loughborough University
Series/Report no.: Loughborough University. Department of Economics. Discussion Paper Series;WP 2008 - 07
Abstract: This paper examines the monthly efficiency and productivity of listed Indonesian banks and their market performance through the prism of two modelling techniques, efficiency and super-efficiency, over the period January 2006 to July 2007. Within this research strategy we employ Tone’s (2001) non-parametric, Slacks-Based Model (SBM) and Tone’s (2002) super-efficiency SBM combining them with recent bootstrapping techniques, namely the non-parametric truncated regression analysis suggested by Simar and Wilson (2007). In the case of the SBM efficiency scores, the Simar and Wilson methodology was adapted to two truncations, whereas in the super-efficiency framework the original technique was utilised. As suggested by neo-classical theory, we find that the stock market values banks in accordance with their performance. Moreover, it is found that the JCI index of the Indonesian Stock Exchange is positively related to bank efficiency. Another interesting finding is that the coefficient for the share of foreign ownership is negative and statistically significant in the super-efficiency modelling. This suggests that Indonesian banks with foreign ownership tend to be less efficient than their domestic counterparts. Finally, Malmquist productivity results suggest that, over the study’s horizon, the sample banks displayed volatile productivity patterns in their profit-generating operations.
Description: This is a working paper. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2008_07.html
Version: Published
URI: https://dspace.lboro.ac.uk/2134/4201
ISSN: 1750-4171
Appears in Collections:Working Papers (Economics)

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