DETERMINANTS OF BANKPROFITEFFICIENCY: EVIDENCE FROMINDONESIA

This study investigates thedeterminants ofbanks’profit efficiency over period2005-2009in Indonesianbanks.Specifically it examines bank size, credit risk,capital, ownership structure and market share on banks profit efficiency.A twostage research methods is employed. First,thescores ofbankefficiencyareestimatedusing Stochastic FrontierAnalysis(SFA).Second, the scores obtainedare linked to a series of determinants of bank efficiency using regressiontechniques.The resultsshowthat score efficiency of bank in Indonesiais stillinefficient. Thereforethat there is a high potential to increase profit efficiencyinIndonesian banks. Other result showthatsize, capital, ownership structureandmarket shareof bankhavesignificantimpacton bank profit efficiencybut creditriskhasinsignificant impact on bank profit efficiency.These results offerpractical contribution to bank managers, practitioners and policymakers ontherelevance of a number driving factorsof bankefficiency that mighthelp themtoimprove bank efficiency and banking system efficiency