An Optimal Control on the Efficiency of Technology Companies in Malaysia with Data Envelopment Analysis Model

Abstract

Technology company is a type of business entity that focuses primarily on the development and manufacturing of technology. Technology sector plays an imperative role in the country as technological advancement can lead the country to move forward for continuous improvement. Therefore, efficiency is important in the evaluation on the performance of companies. The efficiency of the companies can be measured by using Data Envelopment Analysis (DEA) model. DEA is a linear programming model which measures the relative efficiency of the companies as the ratio of the sum-weighted outputs to sumweighted inputs. Efficiency is used to describe how well an organizational unit is performing in utilizing resources to generate outputs or outcomes. The objective of this study is to propose a DEA model by using financial ratio to evaluate and compare the efficiency of the companies from the technology sector in Malaysia. Besides that, this study aims to determine the optimal control of inputs and output weights in maximizing the efficiency for each company. The data consists of the listed companies from the technology sector in Malaysia stock market from year 2011 until 2015. In this study, LINGO software is used to solve the DEA model. The major findings of this study indicate that AMTEL, ELSOFT, GRANFLO, GTRONIC, KESM, MPI, UNISEM and VITROX are ranked as efficient companies. This implies that 44% of the listed companies from technology sector in Malaysia stock market are efficient. This study is significant because it is a pioneer study of proposing a DEA model by using financial ratio to evaluate and compare the efficiency of the listed companies from technology sector in Malaysia stock market.