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Technical Efficiency And Interest Rate Spread In The Indonesian Banking Industry

Technical Efficiency And Interest Rate Spread In The Indonesian Banking Industry
Nury Effendi, Rina Indiastuti, Taslim Z. Yunus, Maman Setiawan
Universitas Padjadjaran, European Journal of Social Sciences ISSN 1450-2267 Vol. 44 No 4 October, 2014, pp.386-392 , http://www.europeanjournalofsocialsciences.com/
Bahasa Inggris
Universitas Padjadjaran, European Journal of Social Sciences ISSN 1450-2267 Vol. 44 No 4 October, 2014, pp.386-392 , http://www.europeanjournalofsocialsciences.com/
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This research investigates the effect of technical efficiency on the interest rate spread in the Indonesian banking sector. This research uses the sample of banks listed in the Indonesian Stock Exchange Market during the period from 2003 until 2012. Technical efficieny is estimated using the data envelopment analysis (DEA) with bootstrapping approach. Regarding the role of bank, the technical efficiency is estimated using the intermediation approach in the DEA. The effect of technical efficiency on the banks’ spread is estimated using panel data regression. This research finds that the banks listed in the Indonesian Stok Exchange Market are moderately efficient with the average technical efficiency of 0.89. The interest rate spread is relatively high during the period of estimation with the spread of 6.66%, on average. This research also finds that the technical efficiency does not affect the banks’ spread indicating that the Indonesian banking sector may not be competitive.

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