Page 144 - Contributed Paper Session (CPS) - Volume 7

CPS2048 Md Zobaer H. et al.
than the SFA average efficiency score (0.8809). Moreover, CDS average
efficiency was 0.8904 that is greater than SFA. However, such types of
differences are not surprising because SFA allows DMUs to depart from the
frontier due to inefficiency as well as statistical noise. But, DEA method cannot
measure statistical noise. These results coincide with the results of Sufian et al.
(2016), Ismail (2005), Isik and Hasan (2002). This study examined that there
was a lesser difference among efficiency scores of financial companies
estimated by DEA, SFA and CDS (SFA scores < CDS scores < DEA scores). The
study suggests that the three models tend to have limited continuity in
selecting the most efficient and least efficient financial companies in terms of
efficiency score.

Figure 1: Efficiency derived from DEA, SFA and CDS
Regression Analysis between Efficiency (derived from DEA, SFA and CDS)
and Profit Risk
From table 2, it is found that the linear regression relationship between
efficiency and profit risk was statistically significant at the 5% level of
significance by DEA (since the p-value was less than 0.05) and at 1% level of
significance by CDS (since the p-value was less than 0.01). This depicts that the
profit risk had positively affected the efficiency of the financial company listed
in Bursa Malaysia. That means, more profitable financial company or less
leverage company was higher efficient and would face a lesser cost of going
insolvent over the period 2007 to 2016. In a study, Fernandes et al. (2018)
applied the DEA method and also found that the profit risk positively affects
the efficiency in European peripheral domestic banks. They found the
coefficient score was 0.216. However, in this study the relation between SFA
and profit risk was insignificant because its p-value was more than 0.05.
Furthermore, its coefficient value was lowest (0.273) among the three
methods. The coefficient value of CDS was 0.54 and that was the highest
among the three methods. The result postulates that 1% increase in efficiency
can increase the profit risk 0.54 %. Finally, from the regression results of three
models, it can be concluded that the best way to measure efficiency is CDS.

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