A new approach to dealing with negative numbers in efficiency analysis: An application to the Indonesian banking sector

Using a new approach, ‘SORM SBM’ DEA, this paper analyses the efficiency of Indonesian banks during the period 2003–2007. The results prove highly sensitive to both the choice of modelling methodology used to handle negative numbers (i.e., Silva Portela et al., 2004 or Emrouznejad et al., 2010), and to the choice of risk control variable, namely loan loss provisions or equity capital. The most efficient bank grouping is generally found to be the ‘state-owned’ banks with the least efficient the ‘regional government-owned’ banks. The results of the impact of scale on the efficiency scores are ambiguous.