Authors : Ku Naraini Che Ku Yusof, Ahmad Rizal Razali and Izah Mohd Tahir
Abstract: The purpose of this study is to measure and evaluate the relative efficiency of 14 public listed companies in Malaysia using a non-parametric approach-data envelopment analysis. Data were obtained from the financial statements gathered by OSIRIS for the period 2004-2008. The relative efficiency of each company, across the 5 years period was examined. The DEA results show under the CRS technology assumption, only one company is considered technically efficient while the average overall technical efficiency varies from 0.13 -0.50. When the aggregate efficiency is decomposed into pure technical efficiency and scale efficiency using VRS production function, it is found that the source of inefficiency is scale inefficiency rather than pure technical inefficiency. Most of the companies are found operating under increasing returns to scale. ThisJune 10, 2010 indicates that managers’ capabilities to utilize a company given resources still need to be enhanced. They must reduce non essential expenses so as to produce efficiently. In addition, the results indicate that on average, 2 out of 14 companies are in quadrant I (super star), characterised by high efficiency and high profitability while 7 companies are in quadrant IV (problem child), characterised by low efficiency and low profitability.
Ku Naraini Che Ku Yusof, Ahmad Rizal Razali and Izah Mohd Tahir, 2010. An Evaluation of Company Operation Performance Using Data Envelopment Analysis (DEA) Approach: A Study on Malaysian Public Listed Companies. International Business Management, 4: 47-52.