Efficiency analysis by combination of frontier methods: Evidence from unreplicated linear functional relationship model

This article [written by Omar Sharif, Md Zobaer Hasan, Yun Fah Chang, Mahboobeh Zangeneh Sirdari ] – published in Business and Economic Horizons, Volume 15(1), 2019.

Title: Efficiency analysis by combination of frontier methods: Evidence from unreplicated linear functional relationship model

Abstract: This study proposes a new efficiency measurement technique CDS as combination of data envelopment analysis (DEA) and stochastic frontier analysis (SFA) and compares the CDS efficiency score with the DEA and SFA efficiency scores. The financial companies listed in Malaysian Stock Exchange for the period 2007-2016 are used to estimate the different types of efficiency score. Besides, linear regression analysis and ULFR (unreplicated linear functional relationship) analysis are used to analyze the performance of this CDS technique with the DEA and SFA techniques. The result suggests that the most efficient model is CDS which has a significant positive correlation with profit risk. Among the CDS, DEA and SFA techniques, the recommended technique (CDS) shows higher coefficient of determination values for both ULFR (0.9994) and linear regression (0.292) analysis. Also, based on the results of CDS, this study postulates that the most efficient firm is ACSM (Aeon Credit Service (M) Bhd) and the least efficient firm is MAY (Malayan Banking Bhd).

Keywords: Malaysian Stock Exchange, data envelopment analysis, stochastic frontier analysis, unreplicated linear functional relationship model

 

Citation: Sharif, Omar; Hasan, Md Zobaer; Chang, Yun Fah; Sirdari, Mahboobeh Zangeneh, 2019.
“Efficiency analysis by combination of frontier methods: Evidence from unreplicated linear functional relationship model”,
Business and Economic Horizons, Vol.15, Issue1, pp.107-125. DOI: http://dx.doi.org/10.15208/beh.2019.7