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

• 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

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.