Relative efficiency of plantation companies in Malaysia: a financial ratio-based data envelopment analysis approach

• Main Authors: Abdul Wahab, Abdul Hamid, Abdul Razak, Dzuljastri
• Format: Article
• Language: English
• Published: South East Asia Journal of Business Economics and Law 2015
• Subjects: HG Finance
• Online Access: http://irep.iium.edu.my/43061/1/KLIBEL_-_South_East_Asia_Journal_of_Contemporary_Business_-___Published.pdf; http://irep.iium.edu.my/43061/; http://seajbel.com/

This study examines the relative efficiency of 31 plantation companies in Malaysia based on data for the first three cumulated quarters of 2012 (January - September). The study applies an adopted version of Data Envelopment Analysis (DEA). DEA is a tool used to weigh the inputs/outputs and measure the relative efficiency of decision-making units. This research adopts an output-oriented form of DEA based on financial ratios without the utilization of inputs. The innovative adopted DEA model provides a comprehensive decision on a company’s efficiency by taking into account various financial ratios all together and combining them into a single measure of efficiency. The results show that out of the 31 plantation companies in Malaysia, only five (16.13%) proved to be efficient. Also, it is found that the higher a company’s financial ratio in relation to the equivalent ratios of other companies, the higher the efficiency score of that company. Keywords: Efficiency, Data Envelopment Analysis, Malaysia, Plantation Companies