Technical, allocative and scale efficiency of Malaysian REITs: The preliminary finding

Chuweni, Nor Nazihah & Eves, Chris (2016) Technical, allocative and scale efficiency of Malaysian REITs: The preliminary finding. In Proceedings of the 22nd Annual Pacific-Rim Real Estate Society Conference, Pacific Rim Real Estate Society (PRRES), Sunshine Coast, Qld.

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Problem/Purpose – The paper examined the technical, allocative and scale efficiency in Malaysian Real Estate Investment Trust (M-REITs) to determine best practice for operations to enhance the performance of M-REITs.

Design/methodology/approach – Sixteen Malaysian REITs from 2013 to 2014 are examined in terms of input and output variables in the efficiency measurement using the non-parametric approach to benchmark and determine which of the REITs are efficient. Input orientation Variable Return to Scale Data Envelopment Analysis (VRS-DEA model) is used for the year 2014 and 2013 using the DEAP version 2.1.

Findings – There were low scores of cost efficiencies for the Malaysian REITs in 2014 and 2013 with 39.90% and 41.60% respectively. The negative inefficient value for the cost inefficiencies is identified in the allocative inefficiencies for both years, showing the mix of inputs to be not correctly utilised. REIT 10 and REIT 16 (of which, one is Islamic) are found to be technical, allocative and scale efficient for both years. For 2014, scale inefficient is identified as the source for technical inefficiency which means Malaysian REITs are not operating at the right scale with 50% operating at economies of scale. Managerial inefficiency however became the source for technical inefficiency in 2013 showing inputs to not be fully minimised to produce more outputs.

Research limitations/implications – These preliminary findings highlight that extending the period of understudy particularly post the Global Financial Crisis (GFC) to date, will better establish the key efficiency for Malaysian REITs.

Originality/value - The development of the empirical framework determine the source of inefficiency for Malaysian REITs. This will assist the REIT managers and the stakeholder in the formulation of best-practice strategy to enhance the efficiency performance and profitability for Malaysian REITs.

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ID Code: 95656
Item Type: Conference Paper
Refereed: Yes
Additional URLs:
Keywords: Allocative, Data Envelopment Analysis, Efficiency, REITs, Scale, Technical
Divisions: Current > Schools > School of Civil Engineering & Built Environment
Current > QUT Faculties and Divisions > Science & Engineering Faculty
Copyright Owner: Copyright 2016 [please consult the authors]
Deposited On: 20 May 2016 01:04
Last Modified: 23 May 2016 01:09

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