A DEA Approach to Explain Relative Productivity Performance of Indonesiaas Regional Government Bank

Abstract

This paper assesses the total factor productivity performance of Indonesia’s regional government banks, using a balance panel data of 26 banks over fifteen year’s periods. The main focus of this study is to judge the performance of the sample banks in terms of total factor productivity growth achieved over the study period, and then to identify the principal sources via the decomposition into efficiency and technological changes. It is important to emphasize that these indicators capture performance relative to the best practices followed by the banks in the sample, where the best practice refers to the grand production frontier achieved by the banks in this study. The findings indicate these banks still have to maximizing the use of inputs to achieve the best practice productivity performance by increasing the output produce from their role as intermediary institutions.