Examining the Efficiency of Co-operatives in Malaysia: An Application of Data Envelopment Research

Abstract

The study examines the technical efficiency, pure technical efficiency, and scale efficiency ofco-operatives in Malaysia. Data ofco-operatives listed in 100 best Malaysian co-operatives from 2010 to 2017wasanalyzed. To construct the efficiency model forthe co-operatives, this studyemployed Data Envelopment Analysis (DEA). In DEA,one input (total assets) and two outputs (net income and dividend)were utilized. The results indicate that Malaysian co-operatives exhibited 62.3% overall technical efficiency during the study period where scale efficiency dominated the overall technical efficiency. Hence, we can suggest that Malaysian co-operatives had been performing better because of the scale of its operation instead of good managerial performance.The result also shows that most co-operatives were operating at non-CRS so that co-operatives need to make improvement in order to recover overall efficiency if pure technical inefficiency lead to the pure technical inefficient co-operatives could be undertaken.The result also demonstrates that scale efficiency (SE) dominated pure technical efficiency (PTE), which means that the scale and size of co-operatives are significant in raising the level of scale efficiency.The management of co-operatives in Malaysia should enhance their managerial performance because the PTE was found to contribute less to overall technical efficiency (OTE).