An Efficiency Determinant of Banking Industry in Indonesia

Abstract

The Objective of this study is to estimate the factors influencing the level of technical efficiency of banks as measured by a non-parametric Data Envelopment Analysis (DEA). This study applies to panel data regression models with random effects approach to 110 conventional bank over 2006-2010. Based on estimation of the determinants of bank efficiency levels, it can be informed that bank size factors, types of banks, capital adequacy ratio, loans deposit ratio, operating expenses and net interest margin affect the level of technica lefficiency significantly. This study has implications both theoretically and managerially. Theoretical implications for this research provide an important contribution to the development of the theory of efficiency and financial performance. Finnaly the managerial implications of this research have the consequences of improving the especially for the domestic banks.

Keywords: Technica lEfficiency, Data Envelopment Analysis,  Panel data regression model