IDEAS home Printed from https://ideas.repec.org/a/idn/journl/v16y2013i2hp155-176.html
   My bibliography  Save this article

Efficiency of Islamic Banks Using Two Stage Approach of Data Envelopment Analysis

Author

Listed:
  • Muhammad Faza Firdaus
  • Muhamad Nadratuzzaman Hosen

Abstract

The aim of this study is to measure the efficiency of Islamic Bank in Indonesia, to analyze the factors that affect the level of efficiency which is known as Two-Stage Data Envelopment Analysis method and to propose measurement of Bank Soundness with modified CAMELS. The objects of this study are 10 (ten) Islamic Bank (BUS) in Indonesia which analyzes from the second Quarter of 2010 until the fourth Quarter of 2012. There are 2 (two) methods which are used in this study, namely non-parametric method of Data Envelopment Analysis (DEA) on the first stage and Tobit model on the second stage. In addition, this study will illustrate the formulation of the financial factors of CAELS instead of CAMEL by integrating the results of efficiency level measurement using DEA in CAELS formulation. Overall, the results, show that the efficiency level of Islamic banks in Indonesia during the time period in this study, have not yet reach the optimum level of efficiency. In addition, modification of CAELS for the bank performance level method by integrating the result of DEA shows that the modification of CAELS could be more accurate in describing the bank performance level, particularly for Islamic Bank in Indonesia.

Suggested Citation

  • Muhammad Faza Firdaus & Muhamad Nadratuzzaman Hosen, 2013. "Efficiency of Islamic Banks Using Two Stage Approach of Data Envelopment Analysis," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 16(2), pages 155-176, October.
    • Handle: RePEc:idn:journl:v:16:y:2013:i:2h:p:155-176
    DOI: https://doi.org/10.21098/bemp.v16i2.442
    as

    Download full text from publisher

    File URL: https://bulletin.bmeb-bi.org/cgi/viewcontent.cgi?article=1229&context=bmeb
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.21098/bemp.v16i2.442?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Franz R. Hahn, 2007. "Determinants of Bank Efficiency in Europe. Assessing Bank Performance Across Markets," WIFO Studies, WIFO, number 31499.
    2. repec:lan:wpaper:1115 is not listed on IDEAS
    3. Azarnoosh Kafi & Behrouz Daneshian & Mohsen Rostamy-Malkhalifeh, 2021. "Forecasting the confidence interval of efficiency in fuzzy DEA," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 31(1), pages 41-59.
    4. Costa, Marcelo Azevedo & Lopes, Ana Lúcia Miranda & de Pinho Matos, Giordano Bruno Braz, 2015. "Statistical evaluation of Data Envelopment Analysis versus COLS Cobb–Douglas benchmarking models for the 2011 Brazilian tariff revision," Socio-Economic Planning Sciences, Elsevier, vol. 49(C), pages 47-60.
    5. Kristiaan Kerstens & Ignace Van de Woestyne, 2018. "Enumeration algorithms for FDH directional distance functions under different returns to scale assumptions," Annals of Operations Research, Springer, vol. 271(2), pages 1067-1078, December.
    6. Ahmad, Usman, 2011. "Financial Reforms and Banking Efficiency: Case of Pakistan," MPRA Paper 34220, University Library of Munich, Germany.
    7. Bowlin, W. F., 1995. "A characterization of the financial condition of the United States' aerospace-defense industrial base," Omega, Elsevier, vol. 23(5), pages 539-555, October.
    8. Büschken, Joachim, 2009. "When does data envelopment analysis outperform a naïve efficiency measurement model?," European Journal of Operational Research, Elsevier, vol. 192(2), pages 647-657, January.
    9. António Afonso & Ana Patricia Montes & José M. Domínguez, 2024. "Measuring Tax Burden Efficiency in OECD Countries: An International Comparison," CESifo Working Paper Series 11333, CESifo.
    10. Helmi Hammami & Thanh Ngo & David Tripe & Dinh-Tri Vo, 2022. "Ranking with a Euclidean common set of weights in data envelopment analysis: with application to the Eurozone banking sector," Annals of Operations Research, Springer, vol. 311(2), pages 675-694, April.
    11. Khanal, Aditya & Koirala, Krishna & Regmi, Madhav, 2016. "Do Financial Constraints Affect Production Efficiency in Drought Prone Areas? A Case from Indonesian Rice Growers," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230087, Southern Agricultural Economics Association.
    12. Jahangoshai Rezaee, Mustafa & Jozmaleki, Mehrdad & Valipour, Mahsa, 2018. "Integrating dynamic fuzzy C-means, data envelopment analysis and artificial neural network to online prediction performance of companies in stock exchange," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 489(C), pages 78-93.
    13. Vuciterna, Rina & Thomsen, Michael & Popp, Jennie & Musliu, Arben, 2017. "Efficiency and Competitiveness of Kosovo Raspberry Producers," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252770, Southern Agricultural Economics Association.
    14. Bogetoft, Peter & Nielsen, Kurt, 2003. "Yardstick Based Procurement Design In Natural Resource Management," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25910, International Association of Agricultural Economists.
    15. Singer, Marcos & Donoso, Patricio & Poblete, Francisco, 2002. "Semi-autonomous planning using linear programming in the Chilean General Treasury," European Journal of Operational Research, Elsevier, vol. 140(2), pages 517-529, July.
    16. Chai, Naijie & Zhou, Wenliang & Hu, Xinlei, 2022. "Safety evaluation of urban rail transit operation considering uncertainty and risk preference: A case study in China," Transport Policy, Elsevier, vol. 125(C), pages 267-288.
    17. Fang, Lei, 2022. "Measuring and decomposing group performance under centralized management," European Journal of Operational Research, Elsevier, vol. 297(3), pages 1006-1013.
    18. Chih-HAI YANG & Leah WU & Hui-Lin LIN, 2010. "Analysis of total-factor cultivated land efficiency in China's agriculture," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 56(5), pages 231-242.
    19. Jinyi Hu, 2023. "Linguistic Multiple-Attribute Decision Making Based on Regret Theory and Minimax-DEA," Mathematics, MDPI, vol. 11(20), pages 1-14, October.
    20. António Afonso & José Alves, 2023. "Are fiscal consolidation episodes helpful for public sector efficiency?," Applied Economics, Taylor & Francis Journals, vol. 55(31), pages 3547-3560, July.
    21. Chen, Yufeng & Ni, Liangfu & Liu, Kelong, 2021. "Does China's new energy vehicle industry innovate efficiently? A three-stage dynamic network slacks-based measure approach," Technological Forecasting and Social Change, Elsevier, vol. 173(C).

    More about this item

    Keywords

    Efficiency; Data Envelopment Analysis (DEA); Tobit Model; CAELS + DEA;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idn:journl:v:16:y:2013:i:2h:p:155-176. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lutzardo Tobing or Jimmy Kathon (email available below). General contact details of provider: https://edirc.repec.org/data/bigovid.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.