Improvement on the Efficiency of Technology Companies in Malaysia with Data Envelopment Analysis Model

Efficiency evaluation is vital as it is able to determine the financial performance of the companies. Efficiency describes how well the companies in utilizing their inputs to generate outputs. The objective of this study is to propose a financial ratio based Data Envelopment Analysis (DEA) model to evaluate and compare the efficiency of listed technology companies in Malaysia for the period of 2011–2015. In DEA model, the efficiency is defined as the ratio of sum-weighted outputs to sum-weighted inputs. In this study, LINGO software is used to solve the DEA model. The results of this study indicate that ELSOFT, GTRONIC, KESM, MPI and VITROX are ranked as efficient technology companies in Malaysia. Besides that, the potential improvement for each inefficient company can be identified based on the benchmark efficient companies. This study is significant because it helps to identify the efficient technology companies which can serve as benchmarks to other inefficient companies for further improvement. Moreover, it is a pioneer study of proposing DEA model with financial ratio to evaluate and compare the efficiency of technology companies in Malaysia.