The Effect of Operational Efficiency on the Financial Performance of Islamic Banks Listed on the Indonesia Stock Exchange for the 2019-2023 Period: Data Envelopment Analysis (DEA) Approach
1Erik Aranda, 2Laila Wardani
1,2Faculty of Economics and Business, University of Mataram, Indonesia
https://doi.org/10.47191/jefms/v7-i12-34ABSTRACT:
Islamic banks in Indonesia face challenges in maintaining stable financial performance and operational efficiency amid the dynamics of increasingly fierce competition. This study aims to explore the effect of operational efficiency as measured by technical efficiency and scale efficiency, on the financial performance of Islamic banks listed on the Indonesia Stock Exchange for the period 2019-2023. The research sample consists of three Islamic banks, namely Bank Syariah Indonesia Tbk, Bank BTPN Syariah Tbk and Bank Panin Dubai Syariah Tbk, which were selected using purposive sampling method. Operational efficiency is measured by the Data Envelopment Analysis (DEA) approach and uses the assumption of Variable Returns to Scale (VRS). Financial performance is measured using Risk, Governance, Earnings and Capital (RGEC) ratios. DEA analysis tools using Banxia Frontier Analysis while multiple linear regression calculations using EVIEWS. The results showed that technical efficiency has no significant effect on financial performance, while scale efficiency has a significant negative effect. Simultaneously, technical efficiency and scale efficiency have a significant effect on financial performance. .These findings indicate that an increase in the scale of operations that is not optimal can have a negative impact on the financial stability of Islamic banks. The implication of this study is the importance of managing the appropriate scale of operations so that Islamic banks can achieve sustainable efficiency without sacrificing financial performance.
KEYWORDS:
Operational Efficiency, Financial Performance, Data Envelopment Analysis, RGEC, Islamic Banks, Indonesia Stock Exchange.
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