Investigating the technical and scale efficiency of cement companies in Saudi Arabia

摘要

Cementandmaterial sector is instrumental in infrastructural development of any economy. The same holds about Saudi cement sector which has contributed substantially to the economic and construc-tion boom in Kingdom of Saudi Arabia (KSA). The cement sector of KSA holds the highest place among other GCC countries. Though, during the last couple of years, the sector seems to be grap-pled with capacity and weighted down due to certain reasons. Nevertheless, almost all of the cement companies in KSA are underplaying their actual capacities. Still, plenty of untapped growth oppor-tunities for cement sector are available in KSA and other GCC countries. Henceforth, considering the growth potential and taking cue from the current scenario of KSA cement sector, the current study endeavors to measure the efficiency of listed cement companies in KSA. The study endeavors to be engrossed in identifying a set of companies which plays on efficiency frontier. Therefore, the technical efficiency performance of fourteen listed cement companies in KSA was measured using Data Envelopment Analysis (DEA) methodology. Two basic models of DEA methodology (i.e. CRSandVRS) were used to estimate the pure and technical efficiency of identified DMUs over a pe-riod of four years from 2016 to 2019. The study reveals that over a period of four years and on an average efficiency scale, only 23% of the firms were purely technically efficient on a CRS scale, while 46% of the firms were technically efficient. Only 23% of the firms were scale and technically efficient. Though, companies in the sector have a vast potential to outperform on efficiency front. Yet, the overall efficiency level among Saudi cement companies are remained depressing. Moreo-ver, the study has noticed that the companies which are inefficient did not have a considerable dis-tance from the efficiency frontier. The study also provided significant insights on the input factors causing inefficiency and suggestion to achieve the total technical efficiency. Furthermore, the effi-ciency analysis also provided benchmarking firms, which are efficient under several criteria for oth-ers to imitate their best practices for becoming a significant player on efficiency frontier.