Examining the efficiency-profitability link in Egyptian companies: a non-parametric DEA approach Online publication date: Sat, 25-Jun-2016
by Mohamed M. Mostafa
International Journal of Business Performance Management (IJBPM), Vol. 17, No. 3, 2016
Abstract: The major aim of this research is to examine the link between efficiency and profitability in Egyptian top listed companies using cross-sectional data for the year 2006. This study uses a non-parametric data envelopment analysis (DEA) approach to measure the relative efficiency of 69 companies in Egypt. The results indicate that there is a positive link between efficiency and profitability in Egyptian companies. The results also indicate that the performance of several companies is sub-optimal, suggesting the potential for significant improvements over both profitability and marketability dimensions. Separate benchmarks were derived for possible reductions in resources used, and significant savings are possible on this account. From a policy perspective, this study highlights the economic importance of encouraging increased efficiency throughout Egyptian companies. At the theoretical level, the study empirically confirms the existence of a positive and significant link between efficiency and profitability.
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