Abstract:

We examine the impact of environmental, social, governance (ESG), liquidity risk, and credit risk on bank efficiency. Our sample includes 13 banks out of a total of 46 banks listed on the Indonesian stock exchange for the 2019-2021 period. We use Data Envelopment Analysis (DEA) to measure bank efficiency scores, and we find that the average bank efficiency has decreased. The banks that achieved 100 percent technical efficiency during the test were BRI and Bank Mega. The average productivity has experienced a greater increase influenced by technology change, which means that banks are good at utilizing increasingly developing technology. Furthermore, the results of the Tobit regression test, finding ESG has a positive relationship, but the impact is not significant on bank efficiency. Both liquidity risk and market risk were found to have a significant but non-linear relationship to bank efficiency. Based on our findings, banks are expected to be able to leverage technology, optimize the use of third-party funds, and control credit risk to achieve efficiency.

Keywords:

Efficiency, Malmquist productivity, ESG, Liquidity risk, Credit risk.

JEL Classification:

M14, M41, M21.

How to Cite:

Desmy Riani, Meutia, Muhamad Taqi and Iis Ismawati. Bank Efficiency and Productivity: Role of Risk and ESG Disclosure. [ref]: vol.21.2023. available at: https://refpress.org/ref-vol21-a249/