COST EFFICIENCY AND ITS DETERMINANTS IN THE EIGHT ISLAMIC PUBLIC BANKS IN INDONESIA

Abstract

The present study was conducted to estimate cost efficiency of Islamic Public banks in Indonesia by using data envelopment analysis (DEA); rank the banks according to their highest and lowest cost efficiency, and to determine the cost efficiency determinants by defining bank specifics and macroeconomics factors. It covers quarterly data of 2011.1 - 2014.4 periods from Indonesian central bank website of the eight Islamic public banks that were selected as the sample of observation. The results revealed that Bank Victoria Syariah performs the best with the average score of 59.7%, while Bank BRI Syariah performance was lowest with an average score of 11.1 %, in term of cost efficiency among all the Islamic public banks in this study.Net operating income, size, and GDP growth rate were found negatively impact and are statistically significant to cost efficiency, while capital adequacy ratio has a positive impact and are statistically significant to cost efficiency.