Performance Evaluation of 10 Indonesian Banks Using Data Envelopment Analysis (DEA)

Soetanto, Tessa Vanina and Ricky, Ricky (2010) Performance Evaluation of 10 Indonesian Banks Using Data Envelopment Analysis (DEA). In: to 2nd Parahyangan International Accounting & Business Conference 2010., 17-18 Juni 2010, Parahyangan University, Bandung.

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Abstract

The analysis of bank performance is important for creditors, investors and governments. Success in competitive markets demands achieving the highest levels of performance through continuous improvement and learning. Comparative analyses can alert institutions to new paradigms and new practices, leading to significant increases in bank efficiency and effectiveness. Bank Indonesia, Indonesian central bank, always issues the rank of 10 biggest banks in Indonesia based on the amount of total assets every year. The rank is not changing much from year to year and it is only different in term of position of each bank. The objective of this paper is to know how productively and economically efficient those biggest banks in doing their dual role as provider of the services (using production approach) and as intermediary function (using intermediation approach) compare to their peers in the industry. A non-parametric analytical technique, Data Envelopment Analysis (DEA), is used to analyze the relative performance of 10 biggest banks in 2009 during the period of 2003-2008. It is concluded that size cannot be the only factor to affirm the efficiency in productive and economical way. Overall most of the banks in the list has operated efficiently in both roles despite the fact of higher national expectation on bank 19s intermediary role. Keyword : banks, DEA, technical efficiency, allocative efficiency, cost efficiency

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