Measuring the technical efficiency of the listed IT companies: Evidence from Bangladesh

Abstract

This study aimed to measure the technical efficiency of information technology (IT) companies listed on the Dhaka Stock Exchange (DSE) in Bangladesh. It included ten listed IT companies for the period 2016–2020. The input-oriented Data Envelopment Analysis (DEA) approach was used to measure technical efficiency. This study used two inputs, such as fixed assets and capital expenditure, and three outputs, such as return on equity, return on assets, and total income, to measure technical efficiency. All the required data were collected from publicly available annual reports, the sample companies’ websites, and the website of DSE. The study found that Bangladeshi-listed IT companies were not adequately technically efficient, with an average efficiency score of 56.6 percent, requiring a 43.6 percent improvement in efficiency during the period 2016–2020. This inefficiency was due primarily to pure technical inefficiency followed by scale inefficiency. The findings of the study are expected to provide important and useful information to the Bangladesh Association of Software and Information Services (BASIS), the Bangladesh Computer Council (BCC), the ICT Division of the Bangladesh government, and the sample companies.