Incorporating Risk into Technical Efficiency: The Case of ASEAN Banks

2018 ◽  
Author(s):  
Ngo Thanh Tra ◽  
Le Quang Minh ◽  
Cai Phuc Thien Khoa ◽  
Ngo Phu Thanh
Keyword(s):  
Technical Efficiency ◽  
Distance Function ◽  
Stochastic Frontier ◽  
Efficiency Analysis ◽  
Directional Distance Function ◽  
Economic Modelling ◽  
Bank Efficiency ◽  
Frontier Analysis ◽  
Asean Countries ◽  
The Impact

The objective of this paper is to incorporate risk in technical efficiency of listed ASEAN banks in a panel data framework for the period 2000 to 2015. Many researchers apply frontier estimation techniques such as data envelopment analysis (DEA) or stochastic frontier analysis (SFA) for their efficiency analysis. However, the banks’ complex production process requires more sophisticated techniques to account for internal structures within the black box so relying only traditional DEA or SFA is not adequate to deal with a multiple-input and multiple-output production technology. To incorporate undesirable outputs such as risk into inefficiency, we rely on the directional distance function (DDF). We employ the DDF under both parametric (SFA) and semi-parametric (SEMSFA) framework to make a comparison efficiency scores with risk adjusted in two scenarios. Our results suggest that risk is an important factor that bank managers should pay more focus to achieve long-term efficiency in ASEAN banks Keywords Bank efficiency; risk; directional distance function (DDF); semiparametric estimation of stochastic frontier models (SEMSFA) References ADB. (2013). The road to ASEAN financial integration: A combined study on assessing the financial landscape and formulating milestones for monetary and financial integration in ASEAN. Andor, M., & Hesse, F. (2014). The StoNED age: the departure into a new era of efficiency analysis? A monte carlo comparison of StoNED and the ‘‘oldies’’ (SFA and DEA). J Prod Anal 41, 85-109. doi: 10.1007/s11123-013-0354-yBerger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance, 21(6), 849-870. Berger, A. N., & Humphrey, D. B. (1997). Efficiency of financial institutions: international survey and directions for future research. European Journal of Operational Research, 98, 175-212. Chan, S.-G., Koh, E. H. Y., Zainir, F., & Yong, C.-C. (2015). Market structure, institutional framework and bank efficiency in ASEAN 5. Journal of Economics and Business, 82, 84-112. Chang, C.-C. (1999). The Nonparametric Risk-Adjusted Efficiency Measurement: An Application to Taiwan’s Major Rural Financial Intermediaries. American Journal of Agricultural Economics, 81(4), 902-913. Chang, T.-C., & Chiu, Y. H. (2006). Affecting factors on risk-adjusted effciency in Taiwan’s banking industry. Contemporary Economic Policy 24(4), 634-648. Gardener, E., Molyneux, P., & Nguyen-Linh, H. (2011). Determinants of efficiency in South East Asian banking. The Service Industries Journal, 31(16), 2693-2719. Huang, T.-H., Chiang, D.-L., & Tsai, C.-M. (2015). Applying the New Metafrontier Directional Distance Function to Compare Banking Efficiencies in Central and Eastern European Countries. Economic Modelling, 44, 188-199. Karim, M. Z. A. (2001). Comparative Bank Efficiency across Select ASEAN Countries. ASEAN Economic Bulletin, 18(3), 289-304. Karim, M. Z. A., Sok-Gee, C., & Sallahudin, H. (2010). Bank efficiency and non-performing loans: Evidence from Malaysia and Singapore. Prague Economic Papers, 2, 118-132. doi: 10.18267/j.pep.367Khan, S. J. M. (2014). Bank Efficiency in Southeast Asian Countries: The Impact of Environmental Variables. In Handbook on the Emerging Trends in Scientific Research. Malaysia: PAK Publishing Group. Laeven, L. (1999). Risk and Efficiency in East Asian Banks (Vol. 2255). Washington, D.C. : World Bank, Financial Sector Strategy and Policy Department.Manlagnit, M. C. V. (2011). Cost efficiency, determinants, and risk preferences in banking: A case of stochastic frontier analysis in the Philippines. Journal of Asian Economics, 22, 23-35. Sarifuddin, S., Ismail, M. K., & Kumaran, V. V. (2015). Comparison of Banking Efficiency in the selected ASEAN Countries during the Global Financial Crisis. PROSIDING PERKEM, 10, 286-293. Sarmientoa, M., & Galán, J. E. (2015). The Influence of Risk-Taking on Bank Efficiency: Evidence from Colombia. CentER Discussion Paper, 2015-036. Vidoli, F., & Ferrara, G. (2015). Analyzing Italian citrus sector by semi-nonparametric frontier efficiency models. Empir Econ, 45, 641-658. Williams, J., & Nguyen, N. (2005). Financial Liberalisation, Crisis, and Restructuring: A Comparative Study of Bank Performance and Bank Governance in South East Asia. Journal of Banking and Finance, 29(8-9), 2119-2154. Wong, W. P., & Deng, Q. (1999). Efficiency analysis of banks in ASEAN countries. Benchmarking: An International Journal, 23(7), 1798-1817. Yueh-Cheng Wu, I. W. K. T., Wen-Min Lu, Mohammad Nourani, Qian Long Kweh. (2016). The impact of earnings management on the performance of ASEAN banks. Economic Modelling, 53, 156-165. Zhu, N., Wang, B., Yu, Z., & Wu, Y. (2016). Technical Efficiency Measurement Incorporating Risk Preferences: An Empirical Analysis of Chinese Commercial Banks. Emerging Markets Finance and Trade, 52, 610-624.  

scholarly journals The Effect of Employing Temporary Workers on Efficiency: Evidence From a Meta-Frontier Analysis

SAGE Open ◽  
2021 ◽  
Vol 11 (4) ◽  
pp. 215824402110581
Author(s):  
Koangsung Choi ◽  
Chung Choe ◽  
Daeho Lee
Keyword(s):  
Technical Efficiency ◽  
Statistical Methods ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Efficiency Analysis ◽  
Temporary Workers ◽  
Frontier Analysis ◽  
Heterogeneous Technologies ◽  
The Impact

This study examines the impact of employing temporary workers on technical efficiency (TE) by employing stochastic frontier analysis (SFA) and meta-frontier analysis (MFA). These two statistical methods yield slightly different, yet empirically meaningful, results. SFA—the more conventional methodology for conducting efficiency analysis—confirms that firms with temporary workers show a somewhat lower level of TE; while MFA, which allows a comparison of TE across groups with heterogeneous technologies, reveals that firms hiring temporary workers are technologically less efficient and have a more pronounced relative gap in efficiency. With the application of MFA, it was observed that firms hiring only temporary workers come farther to the meta-frontier than their counterparts.

scholarly journals Spatial Dependence Evaluation of Agricultural Technical Efficiency—Based on the Stochastic Frontier and Spatial Econometric Model

2021 ◽  
Vol 13 (5) ◽  
pp. 2708
Author(s):  
Ziqi Yin ◽  
Jianzhai Wu
Keyword(s):  
Spatial Distribution ◽  
Technical Efficiency ◽  
Spatial Dependence ◽  
Stochastic Frontier ◽  
Hebei Province ◽  
Agricultural Technology ◽  
Agricultural Product ◽  
Spatial Econometric ◽  
Frontier Analysis ◽  
The Impact

In recent years, through the implementation of a series of policies, such as the delimitation of major grain producing areas and the construction of advantageous and characteristic agricultural product areas, the spatial distribution of agriculture in China has changed significantly; however, research on the impact of such changes on the efficiency of agricultural technology is still lacking. Taking 11 cities in Hebei Province as the research object, this study examines the spatial dependence of regional agricultural technical efficiency using the stochastic frontier analysis and spatial econometric analysis. The results show that the improvement in agricultural technical efficiency is evident in all cities in Hebei Province from 2008 to 2017, but there is scope for further improvement. Industrial agglomeration has statistical significance in improving the efficiency of agricultural technology. Further, there is an obvious spatial correlation and difference in agricultural technical efficiency. Optimizing the spatial distribution of agricultural production, promoting the innovation, development, and application of agricultural technology, and promoting the expansion of regional elements can contribute to improving agricultural technical efficiency.

scholarly journals Labour efficiency in construction industry in Europe based on frontier methods: data envelopment analysis and stochastic frontier analysis

2017 ◽  
Vol 23 (6) ◽  
pp. 787-795 ◽  
Author(s):  
Joanicjusz NAZARKO ◽  
Ewa CHODAKOWSKA
Keyword(s):  
Data Envelopment Analysis ◽  
Construction Industry ◽  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Efficiency Analysis ◽  
European Countries ◽  
Personnel Cost ◽  
Data Envelopment ◽  
Frontier Analysis

The primary problems pertaining to productivity or – more precisely – efficiency are: how to define it and how to measure it. This article studies technical efficiency in Stochastic Frontier Analysis (SFA) – the input-oriented frontier model – in the construction industry and compares it with Data Envelopment Analysis (DEA) results. The models ex­plored in this paper were constructed on the basis of two outputs and personnel cost as an input. The research sample consisted of European countries. The aim was to determine whether there are substantial differences in estimation of ef­ficiency derived from those two alternative frontier approaches. The comparison of results according to the models may translate into higher reliability of the undertaken labour efficiency analysis in construction and its conclusions. Although the results are not characterized by high compatibility, the conducted analysis indicated the most attractive countries taking into account labour cost to profit and turnover ratios of enterprises. One of the determinants which should not be ignored when analysing the labour efficiency is the level of development of a country; however, it is not the sole factor affecting the efficiency of the sector.

scholarly journals TECHNICAL EFFICIENCY ANALYSIS IN INDONESIAN FISHERY PROCESSING INDUSTRY: A CASE OF FISHERY CANNED PRODUCT FIRMS

2019 ◽  
Vol 9 (1) ◽  
pp. 53
Author(s):  
Munawar Asikin ◽  
Arief Daryanto ◽  
Machfud . ◽  
Subagio Dwijosumono
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Efficiency Analysis ◽  
Least Square ◽  
Time Varying ◽  
Efficient Manner ◽  
Processing Industry ◽  
Frontier Analysis ◽  
Ordinary Least Square

This study aims to analyze technical efficiency and evaluate the effect of some sources of inefficiency in the Indonesian fishery canned firms during the period of 1990-2015. We calculate technical efficiency using the Stochastic Frontier Analysis (SFA) method with Time Varying Decay. The average of technical efficiency in this industry during the period of 1990-2015 was only 57%. It indicates that firms in this industry still encounter a problem in allocating the resources in efficient manner.  However, during the period of 1994-2015, the efficiency in the Indonesian fishery canned industry has declined. We also employed the Ordinary Least Square (OLS) method to evaluate the sources of inefficiency. The results showed that eight variables affected to the efficiency in this industry, thereby it will reduce fishery product competitiveness in the future

scholarly journals Estimation of technical efficiency of Czech farms operating in less favoured areas

2019 ◽  
Vol 65 (No. 10) ◽  
pp. 445-453
Author(s):  
Tamara Rudinskaya ◽  
Tomas Hlavsa ◽  
Martin Hruska
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Positive Impact ◽  
Stochastic Frontier ◽  
Agricultural Area ◽  
Farm Size ◽  
Identification System ◽  
Accounting Data ◽  
Frontier Analysis ◽  
The Impact

This paper deals with the technical efficiency analysis of farms in the Czech Republic. The empirical analysis provides an evaluation of technical efficiency with regard to the farm size, farm specialisation, and farm location. Accounting data of Czech farms from the Albertina database for the years 2011–2015 were used for the analysis. The data were classified by the utilised agricultural area and location of the farm expressed as a less favoured area type from the Land Parcel Identification System (LPIS) database. Research was conducted using the translogarithmic production function and Stochastic Frontier Analysis. The results indicate positive impact of farm size, expressed by utilised agricultural area, on technical efficiency. The analysis of the impact of farm specialisation on technical efficiency verified that farms specialised on animal production are more efficient. The lowest technical efficiency is shown by farms situated in mountainous Less Favoured Areas (LFAs), the highest technical efficiency by farms located in non-LFA regions.

scholarly journals EFISIENSI TEKNIS, PERTUMBUHAN TEKNOLOGI DAN TOTAL FAKTOR PRODUKTIVITAS PADA INDUSTRI MENENGAH DAN BESAR DI INDONESIA

2018 ◽  
Vol 6 (1) ◽  
pp. 1-20
Author(s):  
Muhammad Fazri ◽  
Hermanto Siregar ◽  
Nunung Nuryartono
Keyword(s):  
Technical Efficiency ◽  
Manufacturing Industry ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Reform Era ◽  
Frontier Analysis ◽  
Tfp Growth ◽  
Technological Growth ◽  
Before And After ◽  
The Impact

Indonesia's economic growth this decade has good development. Not only growing but also more stable than before the reform era which is visible from the persistence of Indonesia at the level of positive growth during the economic crisis of 2008. Growth was good was followed by a change in the proportion of manufacturing industry in Indonesia which, if seen followed by a decrease in the production of some subsector indices industry. Total factor productivity (TFP) is one measure to look at other factors apart from the impact on production inputs such as technical efficiency and technological growth. In this study, in addition to trying to calculate TFP in some manufacturing industries subsector, in this study also wants to see the value of technical efficiency and the growth of the technology is a component of TFP calculations by the method of Stochastic Frontier Analysis (SFA). The results show that there is growing value of technical efficiency in some industries and most industries experienced relatively low growth of the technology. In the era before and after the crisis most of the industry has increased TFP growth but some industry decreased TFP growth. Keywords: SFA, Technical efficiency, Technological growth, TFP

The Effects of Improved Cassava Variety Adoption on Farmers’ Technical Efficiency in Indonesia

2021 ◽  
Vol 11 (4) ◽  
pp. 269-278
Author(s):  
Syafrial ◽  
Hery Toiba ◽  
Moh Shadiqur Rahman ◽  
Dwi Retnoningsih
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Probit Regression ◽  
Cross Sectional ◽  
Factors Affecting ◽  
Frontier Analysis ◽  
Access To Credit ◽  
Farm Work ◽  
The Impact

The adoption of technological innovations, such as an improved variety, has been widely promoted worldwide to improve agricultural productivity. This study aimed to examine factors affecting farmers’ decision to adopt a new improved cassava varieties (NICV), and to estimate the effects of NICV adoption on farmers’ technical efficiency. This research used cross-sectional data from 300 cassava farmers in East Java, Indonesia. Furthermore, the data were analyzed by probit regression to examine factors affecting farmers’ decision to adopt NICV. Propensity score matching (PSM) procedures and stochastic frontier analysis were applied to evaluate the impact of NICV adoption on farmers’ technical efficiency. The results indicated that adoption was highly influenced by cooperative membership, access to credit, internet access, certified land, and off-farm work. The stochastic frontier analysis, by controlling the matched sample using PSM procedures, demonstrated that NICV adoption positively and significantly impacted farmers’ technical efficiency. Those who adopted NICV showed a higher technical efficiency level than those who did not. This finding implies that improved varieties could be further promoted to increase productivity. The research suggests that there is a need to improve NICV adoption to increase the levels of technical efficiency and productivity.

scholarly journals Technical Efficiency Analysis of Wheat Crop in Arid Region of Punjab, Pakistan

2021 ◽  
pp. 1-9
Author(s):  
Muhammad Fahad Irfan ◽  
Muhammad Umer Afzal ◽  
Kaif Matloob ◽  
Irfan Ahmad Baig
Keyword(s):  
Technical Efficiency ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Sampling Technique ◽  
Efficiency Analysis ◽  
Primary Data ◽  
Wheat Crop ◽  
Analysis Model ◽  
Frontier Analysis ◽  
The Mean

The present study aims to estimate the possible effects of credit on production of wheat crop in Chakwal. The research was based on primary data gathered from 120 farmers, selected by using random sampling technique belonging to two tehsils i.e. Talagang and Chakwal. SFA (Stochastic Frontier Analysis) model was adapted to analyze the data and the results show the mean technical efficiency of the wheat crop was 82 percent for borrowers and 76 percent for non-borrowers. The results proposed that the technical efficiency of wheat growers can be increased by increasing loan disbursement in the area.

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