Measuring technical efficiency of Malaysian REITs: A Data Envelopment Analysis approach

Chuweni, Nor Nazihah & Eves, Chris (2016) Measuring technical efficiency of Malaysian REITs: A Data Envelopment Analysis approach. In 8th International Real Estate Research Symposium (IRERS 2016), 26-28 April 2016, Putra World Trade Centre, Kuala Lumpur, Malaysia. (In Press)

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The paper examined the technical efficiency (TE) and economies of scale for the Malaysian Real Estate Investment Trust (M-REITs) using a non-parametric approach of Data Envelopment Analysis (DEA). Data was attained from M-REIT annual reports, Thomson Reuters Datastream and Osiris via Bureau Van Dijk for 2010-2014. The non-parametric approach of Variable Return to Scale DEA (VRS-DEA model) was used in estimating the efficiency scores for the M-REITs, where the input data comprised property operating expense, interest expense, and administrative & management expense, while the total asset represents the output. The negative inefficient value for the technical inefficiencies are identified as a result of both poor input utilisation of input (managerial inefficiency) and failure of M-REITs to operate at constant return to scale (scale inefficiency). The mean technical efficiency (TE) measures range as low as 35.80% in 2011 to 86.10% in 2013. Managerial inefficiency has a greater deviation in the efficient frontier than scale inefficiency, suggesting that inputs are not fully minimised to produce more outputs for 2010-2014. With regard to scale inefficiency, most M-REITs are operating at economies of scale except during 2013, indicating the importance of expansion or growth to improve on efficiency performance. The empirical evidence of this paper determined the source of inefficiency for M-REITs post Global Financial Crisis (GFC). The authors will extend this research and undertake future research on investigating the key determinants for the efficiency of M-REITs using the parametric approach. This paper provides new empirical evidence on the efficiency of M-REITs post GFC. By examining the mean inefficiencies of the input and output values, the main sources of M-REITs inefficiency could be identified for M-REIT managers to formulate ways to enhance the REIT efficiency. The findings are also applicable to similar Sharia compliant real estate investment or socially responsible investment.

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ID Code: 95655
Item Type: Conference Paper
Refereed: Yes
Additional Information: Encouragement Award
Additional URLs:
Keywords: Data Envelopment Analysis, Efficiency, Malaysia, Scale, Technical
Divisions: Current > Schools > School of Civil Engineering & Built Environment
Current > QUT Faculties and Divisions > Science & Engineering Faculty
Copyright Owner: Copyright 2015 Penerbit UTM Press
Deposited On: 20 May 2016 04:22
Last Modified: 10 Jun 2016 12:07

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