Efficiency of Modaraba and Leasing Companies in Pakistan

The study has estimated the profit efficiency, technical efficiency and cost efficiency of modaraba and leasing companies in Pakistan over the period of 2005 to 2010 with the help of parametric Stochastic Frontier Approach (SFA). The input and output variables were selected by following the value added approach. The results revealed that leasing companies are 86.4% profit efficient, 86.5% technical efficient and 89% cost efficient whereas, modaraba companies are 87.2% profit efficient, 51.2% technical efficient and 96.1% cost efficient. Moreover, the study also found that the financial crisis in 2009 has negatively affected the profit efficiency of leasing firm whereas, the study do not find any drop in the efficiency trend of modaraba companies.