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Title: Analysis of Indonesia’s Regional Development Banks’ (RDB) Performance Using Stochastic Frontier Analysis
Abstract: The dominance of the banking sector demonstrates how crucial the banking sector is to Indonesia’s economic growth. Regional Development Banks (RDB) are required to contribute to the economy through top performance as members of the national banking sector. The degree of efficiency is one of the key metrics for assessing business performance, including in the banking sector. From a micro and macro perspective, efficiency in the banking sector can be seen. This enables banks to allocate financial resources to increase investment activities that can boost the economy and survive in the face of increasingly fierce competition in technology-based products and services. Therefore, using stochastic frontier analysis, this study assessed the level of cost and profit efficiency of the RDB industry in Indonesia for the years 2011 to 2020 as well as the internal and external factors that contribute to RDB inefficiency (SFA). The findings indicate that there are no RDBs that are profitable and cost-effective. Additionally, in contrast to non-performing loans, the variables capital adequacy ratio and technology investment have an impact on increasing cost and profit efficiency. Therefore, managing and improving high-quality loans as well as optimizing idle funds are the two main things that must be done in order to maximize the xRDB’s cost and profit efficiency.
Keywords: Regional Development Bank (RDB); cost efficiency; profit efficiency; SFA
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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