ABSTRACT
This study aims to reveal the cost efficiency of Indonesian commercial banks during the period 2015-2016 using the parametric approach. The study employs stochastic frontier analysis to estimate banking cost efficiency with the extent of analyses covering the performance of different ownership, operation, and different groups of capital over the study period. The findings suggest that the average cost efficiency of Indonesian commercial banks has declined in 2016. Private Banks have emerged to be the most cost-efficient banks compared to their peers. Islamic banks are more cost-efficient than conventional banks. Banks of the first group of capital (BUKU 1) have experienced more cost efficiency than the other group of banks. Loans to Deposits Ratio (LDR), Return on Assets (ROA) and Other Operating Income, each has a positive impact on bank cost efficiency. Bank size also has a positive association with bank cost efficiency.
