Determinants of Bank Efficiency during Financial Restructuring Period: Indonesian Case

Abstract

The banking sector in Indonesia had been through many challenges aftermath the 1997 Asian financial crisis. The restructuring programs aimed to strengthen and improve the performance of the banking system. Empirical researches around the world, however, present various result with regard to the effect of the policy on bank efficiency. We investigated the determinants of the relative efficiency of the Indonesian banking industry. Using panel data of 101 Indonesian commercial banks, this study employs a non-parametric frontier method, Data Envelopment Analysis (DEA), to measure the efficiency score. In the second stage, the Tobit regression model used to analyze the factors that potentially determine the variation of efficiency score. The finding indicated the bank was technically inefficient particularly during financial restructuring. The improvement was evidence toward the end of the period. Bank size, macroeconomic factors, and three bank groups were strongly associated with bank efficiency level. There was no strong evidence that merger, which typically the form of restructuring policy output, positively associated with bank efficiency.

Efficiency Assessment and Determinants of Performance: A Study of Jordan’s Banks Using DEA and Tobit Regression

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“…Bank dapat memediasi green banking dengan memberikan kredit dan investasi yang mengikuti prinsip-prinsip hijau dan bertanggung jawab secara sosial. Menurut Defung (2018) efisiensi bank secara langsung mempengaruhi kinerja keuangan bank, termasuk kemampuan bank untuk menciptakan nilai bagi pemegang saham.…”

The Influence of the Bank Restructuring on the Financial Performance of Commercial Banks in Iraq

“…An investigation into the factors that influence the relative efficiency of Indonesian banks was conducted by Defung (2018). After the Asian financial crisis of 1997, the banking industry in Indonesia faced numerous difficulties.…”