Total factor productivity of Islamic stock market: Evidence from Indonesia

Abstract

This study aims to measure and analyze the efficiency and productivity growth of the Indonesian Islamic stock market during the 2017–2021 period. Using the non-parametric Data Envelopment Analysis (DEA) method and the Malmquist index, the study recorded an unstable Total Factor Productivity (TFP) level of Islamic stocks. In the period 2018–2019 and 2019–2020, the TFP of Islamic stocks have shown an increasing trend. However, in the 2017–2018 and 2020–2021 periods, the TFP of Islamic stocks have shown a declining trend, mainly contributed by technological advancements. On the other hand, changes in technical efficiency have deteriorated the TFP of Islamic stocks. The findings signified the importance of embracing superior technology, enhancing the scale, and the managerial capacity of companies that issue Islamic stocks by combining the ideal mix of inputs to produce the optimal output to contribute to a continuous improvement in TFP.