DOI: 10.36347/sjebm.2014.v01i11.009

Pages: 586-592

Malaysia’s banking industry is undergoing changes and overall competition. Commercial banks in Malaysia not only need to become profitable, but also efficient in order to enhance the economic growth and survive against its competitors. Data Envelopment Analysis (DEA) is a well-known non-parametric technique to measure the relative efficiency of banks. There are several studies on Malaysia’s bank efficiency using conventional DEA models which are not able to discriminate between technically efficient banks. This study applies a recent robust DEA model, called Kourosh and Arash Model (KAM), to measure the relative efficiency of 15 commercial banks of Malaysia in 2013 with 4 inputs and 3 outputs. Several DEA models are applied and shows how KAM logically increases the discrimination power of DEA, and identifies the most efficient banks as well as introducing the reference sets for technically efficient and inefficient banks. The results in average indicate that Malaysia’s local banks are more efficient than Malaysia’s foreign banks in 2013.