How to cite this paper: Kembo M. Bwana (Corresponding Author) (2019), Paper Title: Efficiency of Listed Manufacturing Firms in Dar es Salaam Stock Exchange: Data Envelopment Analysis Model. Business Education Journal (BEJ), Volume III, Issue I, 10 Pages. www.cbe.ac.tz/bej 1 Business Education Journal Volume III Issue I Email: jeditor@cbe.ac.tz Published Online September, 2019 in http://www.cbe.ac.tz/bej EFFICIENCY OF LISTED MANUFACTURING FIRMS IN DAR ES SALAAM STOCK EXCHANGE: DATA ENVELOPMENT ANALYSIS MODEL Kembo M. Bwana 1 (PhD) and Omary J Ally 2 1. Senior Lecturer - Accountancy Department 2. Assistant Lecturer –Accountancy Department College of Business Education –Dodoma Campus, P.O. Box 2077 Dodoma, Tanzania, Corresponding Author: Email kembo211@gmail.com ABSTRACT The aim of this paper is to measure the efficiency of listed manufacturing companies in Tanzania, the study covers the year 2010 to 2014. The study employed a non-parametric approach, known as Data Envelopment Analysis (DEA) to measure efficiency under input oriented with constant returns to scale (CRS) and variable returns to scale assumptions (VRS). The study also employs Pearson correlation to test positive correlation between inputs and outputs variables. Data was extracted from respective annual financial reports of the manufacturing firms listed at Dar es Salaam stock exchange (DSE) before the year 2010. Three critical inputs variables (raw materials, staff expenses as well as plant and machinery) and two output variables (net sales and earnings after tax) were employed to measure relative efficiency of 6 listed manufacturing. Findings revealed that Tanzania Cigarette Company (TCC) was performing relatively better in terms of pure technical efficiency (PTE) and scale efficiency (SE) with an average efficiency score of 98% and 99 % respectively. While, Tanzania Oxygen Limited (TOL) experienced difficulties in terms of PTE and SE with an average efficiency score of 72% and 45% respectively. Results of average annual performance in the years 2010, 2011 and 2012 were better compared to the remaining years. Result for returns to scale indicates that there was no firm which consistently experienced increasing return to scale (IRS) throughout the period under review, which implies that none of the firms has the room to enjoy economies of scale throughout the period under review. Findings have significant bearing on policy issues relating to size of manufacturing firms in the country. Firms indicating decreasing returns to scale (DRS) should revisit their size versus production scale so as to improve the scale efficiency. The findings from this study can also enrich the ongoing agenda of promoting industrialization in Tanzania particularly, on issues relating to size and production scale (optimality). Keywords: Efficiency, Manufacturing Firms, Data Envelopment Analysis (DEA), Tanzania 1. INTRODUCTION Tanzania is one of the East African countries, others include Kenya, Uganda, Rwanda, Burundi and South Sudan. In terms of economic power, the country ranks the second after Kenya. Tanzania economy has evolved through various stages of development over time. Soon after political independence in 1961, the country continued to pursue a private sector-led, capitalist economic system, where by almost all major means of production including industries, agriculture, mining, banks and others were in the hands of private investors. In 1967, the country took completely different direction following the Arusha Declaration in 1967, which established the Ujamaa (African Socialism) Policy. With ujamaa policy all major means of production were put under state ownership, control and management. In the manufacturing sector, Tanzania adopted an Import Substitution Industrialization (ISI) strategy, which created a number of state-owned enterprises (SOEs), and introduced development initiatives for small scale industries. Due to inadequate production capacity which could satisfy local market there was excessive shortage of the products in the market which led to the economic crisis. In the mid-1980s, Tanzania re-embraced a private sector- and market-led economic system which paved the way for the privatization of SOEs; several reforms which allowed the private sector to play a major role in productive economic activities; and both local and international trade were liberalized, including importation of manufactured goods. Generally, these economic reforms have made noticeable differences in manufacturing sector performance especially since the 1990s. Nevertheless, the share of the manufacturing sector to GDP and its growth rate has remained relatively stagnant over the past decade. While some manufacturing subsectors have grown constantly over time, others have remained inert (Wangwe et al, 2014)