Banking productivity analysis in Indonesia: Empirical evidence using Malmquist Productivity Index based DEA and an Error Correction Model approach

Authors

  • Dini Rahmayanti Dini Faculty of Islamic Economics and Business, UIN Salatiga
  • Diyah Ariyani Faculty of Islamic Economics and Business, UIN Salatiga
  • Anisa Dewi Rismaya Faculty of Islamic Economics and Business, UIN Salatiga

DOI:

https://doi.org/10.53088/jerps.v3i3.929

Keywords:

Data Development Analysis, Indonesian banking, Malmquist Productivity Indices

Abstract

The level of productivity can be used as a benchmark for assessing the performance of a bank so that we can find out how efficient a bank's performance is or how banking productivity is so that we can still get maximum and efficient performance amidst the many choices of customers in choosing bank. This research examines how banking productivity has changed in Indonesia, using banking report data in Indonesia for the 2017-2022 period. Data Envelopment Analysis (DEA) linear programming model, which is used based on the Malmquist Index to measure changes in Total Factor Productivity (TFP). Regression model to describe what variables influence changes in banking productivity in Indonesia. With the Error Correction Model, the Loan-to-Deposit Ratio (LDR) and Return on Equity (ROE) have a significant effect on productivity in the long term. The pandemic crisis does not affect productivity. Meanwhile, in the short term, Net Interest Margin has a significant effect on banking productivity in Indonesia.

Author Biography

Dini Rahmayanti Dini, Faculty of Islamic Economics and Business, UIN Salatiga

 

 

References

Abbas, M., Hammad, R. S., Elshahat, M. F., & Azid, T. (2015). Efficiency, productivity and Islamic banks: an application of DEA and Malmquist index. Humanomics: The International Journal of Systems and Ethics, 31(1), 118–131.

Abhiman Das, S. G. (2009). Financial Deregulation and Profit Efficiency: A Non-parametric Analysis of Indian Banks. Munich Personal RePEc Archive, 24292, 183–187.

Aini, N., & Kristanti, I. N. (2020). The Effect of Intellectual Capital, LDR, DAR and TATO on Profitability in Banking Companies. Jurnal Ilmiah Mahasiswa Manajemen, Bisnis Dan Akuntansi (JIMMBA), 2(5), 699–712. https://doi.org/10.32639/jimmba.v2i5.636

Alsharif, M., Nassir, A. M., Kamarudin, F., & Zariyawati, M. A. (2019). The productivity of GCC Islamic and conventional banks after Basel III announcement. Journal of Islamic Accounting and Business Research, 10(5), 770–792. https://doi.org/10.1108/JIABR-04-2017-0050

Anggraeni, E. P., & Rahmayanti, D. (2023). Assessing Long-Term and Short-Term Relationships on Company Profits Through The Company’s Internal. Mutanaqishah: Journal of Islamic Banking, 3(1), 14–26.

Antika, D., & Novyarni, N. (2020). Pengaruh Car, Rasio Bopo, Fdr Dan Npf Terhadap Profitabilitas. Sekolah Tinggi Ilmu Ekonomi Indonesia, 5(December), 1–10.

Asutay, M., & Othman, J. (2020). Alternative measures for predicting financial distress in the case of Malaysian Islamic banks: assessing the impact of global financial crisis. Journal of Islamic Accounting and Business Research, 11(9), 1827–1845. https://doi.org/10.1108/JIABR-12-2019-0223

Chen, S. H. (2013). What determines bank productivity? International evidence on the impact of banking competition, bank regulation, and the global financial crisis. International Finance Review, 14, 141–171. https://doi.org/10.1108/S1569-3767(2013)0000014009

Chiou, C.-C. (2009). Effects of Financial Holding Company Act on bank efficiency and productivity in Taiwan. Neurocomputing, 72(16–18), 3490–3506.

Cooper, W. W., Seiford, L. M., & Zhu, and J. (2018). Data Envelopment Analysis History, Models and Interpretations (Vol. 3, Issue May).

Coryanata, I., Ramli, E. H., Puspita, L. M. N., & Halimatusyadiah. (2023). Digitalization of Banking and Financial Performance of Banking Companies. International Journal of Social Service and Research, 3(2).

Damodar, G. (2015). Cointegration and Error Correction Models. https://doi.org/10.1007/978-1-137-37502-5_14

Delis, M. D., Molyneux, P., & Pasiouras, F. (2011). Regulations and productivity growth in banking: Evidence from transition economies. Journal of Money, Credit and Banking, 43(4), 735–764. https://doi.org/10.1111/j.1538-4616.2011.00393.x

Desta, T. S. (2018). Are the best African banks really the best? A Malmquist data envelopment analysis. Meditari Accountancy Research, 34(1), 1–5.

Gupta, O. K., Doshit, Y., & Chinubhai, A. (2008). Dynamics of productive efficiency of Indian banks. International Journal of Operations Research, 5(2), 78–90.

Hasan, I., & Marton, K. (2003). Development and efficiency of the banking sector in a transitional economy: Hungarian experience. Journal of Banking & Finance, 27(12), 2249–2271. https://doi.org/https://doi.org/10.1016/S0378-4266(02)00328-X.

Hery, S. . (2018). Analisis Laporan Keuangan (Adipramono (ed.)). Grasindo.

Ishak, F., Dungga, M. F., & Amali, L. M. (2022). The Influence of Productive Asset Quality (KAP) and Net Interest Margin (NIM) on Profitability at National Private Commercial Banks. 5(1), 89–97.

Isyunanda, K. P. (2020). Central Bank and Covid-19 Pandemic: Quo Vadis? Mimbar Hukum, 32(3), 461–483.

Jreisat, A., Hassan, H., & Shankar, S. (2018). Determinants of the Productivity Change for the Banking Sector in Egypt. Global Business Review, 19(2), 280–296. https://doi.org/10.1177/0972150917713508

Jreisat, A., Hassan, & Sankar, S. (2018). Determinants of the Productivity Change for the Banking Sector in Egypt. Global Tensions in Financial Markets, 34. https://doi.org/https://doi.org/10.1108/S0196-382120170000034011

Junaidi, W. C. (2021). The Effect of Return on Assets and Return on Equity on Stock Prices on the Indonesian Stock Exchange. Jurnal Ilmiah Akuntansi Dan Humanika, 11(2), 189–198.

Kamarudin, F., Hue, C. Z., Sufian, F., & Mohamad Anwar, N. A. (2017). Does productivity of Islamic banks endure progress or regress?: Empirical evidence using data envelopment analysis based Malmquist Productivity Index. In Humanomics (Vol. 33, Issue 1). https://doi.org/10.1108/H-08-2016-0059

Kim, S. H., & Taylor, D. (2014). Intellectual capital vs the book-value of assets: A value-relevance comparison based on productivity measures. Journal of Intellectual Capital, 15(1), 65–82. https://doi.org/10.1108/JIC-04-2013-0048

Kumar, L., Malathy, D., & Ganesh, L. S. (2010). Productivity growth and efficiency change in Indian banking: Technology effect vs catch effect. Journal of Advances in Management Research, 7(2), 194–218. https://doi.org/10.1108/09727981011084995

Nartey, S. B., Osei, K. A., & Sarpong-Kumankoma, E. (2020). Bank productivity in Africa. International Journal of Productivity and Performance Management, 69(9), 1973–1997. https://doi.org/10.1108/IJPPM-09-2018-0328

Narwal, K. P., & Pathneja, S. (2015). Determinants of Productivity and Profitability of Indian Banking Sector: A Comparative Study. Eurasian Journal of Business and Economics, 8(16), 35–58. https://doi.org/10.17015/ejbe.2015.016.03

Octrina, F., & Pratidina, R. (2021). Productivity of Conventional Commercial Banks in Indonesia Using the Malmquist Productivity Index (Case Studies in BUKU I and BUKU II 2016-2019). EProceedings of Management, 8(5), 4783–4794.

Otaviya, S. A., & Rani, L. N. (2020). Productivity and Determinant of Islamic Banks Evidence From Indonesia. Journal of Islamic Monetary Economics and Finance, 6(1), 189–212. https://doi.org/10.21098/jimf.v6i1.1146

Sitompul, S., & Nasution, S. K. (2019). The Effect of Car, BOPO, NPF, and FDR on Profitability of Sharia Commercial Banks in Indonesia. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 2(3), 234–238. https://doi.org/https://doi.org/10.33258/birci.v2i3.412

Sufian, F., & Habibullah, M. S. (2012). Developments in the efficiency of the Malaysian banking sector: the impacts of financial disruptions and exchange rate regimes. Progress in Development Studies, 12(1), 19–46.

Sufian, F., & Haron, R. (2008). The sources and determinants of productivity growth in the Malaysian Islamic banking sector: a nonstochastic frontier approach. International Journal of Accounting and Finance, 1(2), 193–215.

Widjanarko, O. (2020). Bank Indonesia Strengthening Measures To Maintain Monetary And Financial Stability. Bank Indonesia.

Downloads

Published

2023-12-30

How to Cite

Dini, D. R., Ariyani, D., & Rismaya , A. D. (2023). Banking productivity analysis in Indonesia: Empirical evidence using Malmquist Productivity Index based DEA and an Error Correction Model approach. Journal of Economics Research and Policy Studies, 3(3), 200–214. https://doi.org/10.53088/jerps.v3i3.929

Issue

Vol. 3 No. 3 (2023): Journal of Economics Research and Policy Studies

Section

Articles

License

Copyright (c) 2023 Dini Rahmayanti Dini, Diyah Ariyani, Anisa Dewi Rismaya

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Copyright @2021. This is an open-access article distributed under the terms of the Creative Commons Attribution-ShareAlike 4.0 International License ( https://creativecommons.org/licenses/by-sa/4.0/)

Journal of Economics and Policy Studies is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.