THE DETERMINANTS OF BANK’S EFFICIENCY IN INDONESIA

Astoeti Wahjoe Widiarti (), Hermanto Siregar and Trias Andati
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Astoeti Wahjoe Widiarti: OJK
Hermanto Siregar: School of Business Bogor Agricultural University
Trias Andati: School of Business Bogor Agricultural University

Bulletin of Monetary Economics and Banking, 2015, vol. 18, issue 2, 129-156

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.

Keywords: Banking; efficiency; panel estimation; Indonesia (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:18:y:2015:i:2a:p:129-156

DOI: 10.21098/bemp.v18i2.520

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