Financial performance and efficiency of cooperatives in Malaysia

Cooperatives are organisations that are created jointly by participants to meet their economic needs and interests. The role of cooperatives in Malaysia cannot be denied since it consists in the Malaysian financial system. However, the performance of cooperatives in Malaysia in term of turnover is still low compared to the other countries. This will be a cause for concern because inadequacies of financial decision lead to failure of cooperatives. Therefore, the study aims to evaluate the financial performance and efficiency of cooperatives in Malaysia. The study utilized the data from Malaysian Cooperative Commission. A total of 15 cooperatives that listed in 100 best cooperatives in all consecutive years from 2010 to 2017 were assessed in this study. Five basic financial ratios utilized in this study in order to examine to what extent the financial performance of cooperatives in Malaysia. Data Envelopment Analysis (DEA) is used to evaluate the efficiency of the cooperatives. Tobit Analysis also utilized in this study to determine factors that influence efficiency of cooperatives. The results found that liquidity ratio is still low and cooperatives that score the highest liquidity ratio may be due to the age of establishment. In overall, the study found that Malaysian co-operatives had been performing better because of the scale of its operation instead of good managerial performance. The result also demonstrates that scale efficiency (SE) dominated pure technical efficiency (PTE), which means that the scale and size of co- operatives are significant in raising the level of scale efficiency. The management of co- operatives in Malaysia should enhance their managerial performance because the PTE was found to contribute less to overall technical efficiency (OTE).