TECHNICAL EFFICIENCY AND THE DETERMINANTS OF PRICE BOOK VALUE: AN EMPIRICAL STUDY OF CATEGORY-IV BANKS IN INDONESIA STOCK EXCHANGE

Abstract

This research aimed to empirically determine the value relevance of price to book value (PBV) and technical efficiency (TE) within Category-IV banks in Indonesia Stock Exchange in the time horizon of 1Q2007 to 4Q2015. This research uses time series and quarterlypublished financial statement from the listed Category-IV banks. In term of variables that determine PBV by using panel least square, the research reveals that pre-provision operating profit (PPOP) and return on total assets (ROTA) have positive and significant effect towards PBV, while non-performing loan (NPL) and dividend yield have negative and significant effect towards PBV. Contrarily, firm size has negative and insignificant effect towards PBV. Additionally, the result of data envelopment analysis (DEA) which is used to measure technical efficiency, indicates that PT. Bank Mandiri Tbk. (BMRI) is the most efficient Category-IV bank. BMRI led with average technical efficiency score of 98.95%, followed by PT. Bank Rakyat Indonesia Tbk. (BBRI) 98.02%, PT. Bank Negara Indonesia Tbk. (BBNI) 96.04% and PT. Bank Central Asia Tbk. 94.94%. The average technical efficiency of Category-IV banks within the period of research is 96.99%.