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The Determinants of Bank's Efficiency in Indonesia

Year: 2015

Type: article

Abstract: This paper measures the efficiency of the banks using the intermediation approach and the Data Envelopment Analysis (DEA) on quarterly data of 108 conventional banks in Indonesia during the period of 2012Q1 to 2014Q4. The results shows that the Indonesian banking industry is inefficient in its intermediation function, which is in line with their financial indicators namely the total increasing asset, stable ROA of around 2-3%, and their Operating to Income Cost ratio of about 66-83%. Furthermore, we apply data panel estimation to estimate the determinant of this efficiency; the result shows the bank’s type, the Non Performing Loan (NPL), the Loan to Deposit Ratio (LDR), the size of the bank, the Cost Efficiency Ratio (CER), and the Capital Adequacy Ratio (CAR); significantly affect the bank’s efficiency in Indonesia.

Source: Bulletin of Monetary Economics and Banking

DOI: 10.21098/bemp.v18i2.520

Authors: Astoeti Wahjoe Widiarti, Hermanto Siregar, Trias Andati

Institutions: Bank Indonesia, IPB University

Language: English

Topic: Efficiency Analysis Using DEA

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: diamond

OpenAlex ID: W2344335558

FWCI: 1.667

Cites: 25

Cited by: 46

Related to: 10