摘要：This paper examines the soundness of the Indonesian
banking sector by describing its transition and current
status. In particular, we focus on the government-led
bank consolidation after the Asian currency crisis and
provide a qualitative prospect of the role of the
consolidation in bank restructuring. On that basis, we
estimate a nonparameric frontier function that does
not specify any functional form, and analyze
efficiency with a quantitative measure.
The conclusion of the paper is summarized as
follows. First, performance of the Indonesian banking
sector has seen gradual recovery, in real terms.
Second, privatization of state banks (sales of
government-owned shares to the private sector) has
not always brought subsequent improved business
performances and market valuations. Third, given the
estimation result of DEA with measures the level of
ineff iciency and total factor productivity, the
Indonesian banking sector is confirmed to be on a
recovery trend.
