Measuring Technical Efficiency of Construction Listed Companies Based on Different Distribution using Stochastic Frontier Model

This study investigated the technical efficiency and robustness of efficiency score rankings across two distributional assumptions for Cobb-Douglas production frontier model for 20 Malaysian construction companies over the period of 2013 to 2017. Stochastic frontier of Cobb-Douglas production functi...

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Bibliographic Details
Published in:ASM Science Journal
Main Author: Arsad R.; Isa Z.
Format: Article
Language:English
Published: Akademi Sains Malaysia 2020
Online Access:https://www.scopus.com/inward/record.uri?eid=2-s2.0-85131054992&doi=10.32802%2fasmscj.2020.sm26%284.3%29&partnerID=40&md5=6d4362e61aae0a6634a67c8811a6355f
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Summary:This study investigated the technical efficiency and robustness of efficiency score rankings across two distributional assumptions for Cobb-Douglas production frontier model for 20 Malaysian construction companies over the period of 2013 to 2017. Stochastic frontier of Cobb-Douglas production function and maximum likelihood estimation technique applied to estimate the parameters with half-normal and truncated-normal distributions by a model with both time-variant and time-invariant inefficiency effects. Based on the likelihood ratio test, deviations from the efficient frontiers of function mainly recognized technical inefficiency, with a half-normal distribution for time-invariant inefficiency effect. This study shows that time did not contribute to efficiency performance over the short-investigated period. The Spearman rank correlation results of this study show that both distribution ranking for time-invariant inefficiency effect have a strong and significant relationship, while their rankings are quite consistent to distributional choice. The results also show that both efficiency scores are also diverse © 2020. ASM Science Journal.All Rights Reserved.
ISSN:18236782
DOI:10.32802/asmscj.2020.sm26(4.3)