Pustaka Ilmiah Universitas Padjadjaran

Abstrak

The Relationship Between Technical Efficiency and Pricing in the Indonesian Banking Sector

Pricing in the banking sector can affects the Indonesian economy significantly, since the pricing is able to alter the economic decisions of both depositors who save the money and people who borrow the money. Conceptually, the pricing is related to banks’ operation in which the banks transform the inputs into outputs. This research investigates the effect of technical efficiency on the pricing in the Indonesian banking sector. The pricing is measured by the interest rate spread between the deposit and lending interest rate. It is hypothesized that the higher efficiency of the banks results in the less interest rate spread. This research uses the sample of banks listed in the Indonesian Stock Exchange Market during the period from 2002 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 relatively inefficient. The interest rate spread is relatively high during the period of estimation with the spread of 5.8%, on average. Furthermore, the technical efficiency affects the banks’ spread negatively indicating the importance of the banking efficiency on the pricing.