Bank efficiency and share performance: evidence from Greece

Abstract

This article examines for the first time the association between the efficiency of Greek banks and their share price performance. Our analysis consists of three parts. First, we calculate the annual share price returns of the banks for each year between 2001 and 2005. Then we use data envelopment analysis to estimate the efficiency of the banks between 2000 and 2005. Finally, we regress the annual share price returns over the annual change of efficiency while controlling for changes in banks' size and risk. We find that the average technical efficiency under constant returns to scale is 0.931 and increases to 0.977 under variable returns to scale, resulting in a scale efficiency of 0.953. The regression results indicate a positive and statistically significant relationship between annual changes in technical efficiency and stock returns, while changes in scale efficiency have no impact on stock returns.

The Relationship Between Bank Efficiency and Stock Returns: Evidence from Asia and Latin America

“…In an attempt to close this gap, studies from the banking literature have recently investigated the relationship between bank efficiency, and stock returns 3 . However, despite the substantial number of studies on bank efficiency, this specific strand of the literature remains rather limited with only a handful of country-specific studies covering Australia (Kirkwood and Nahm, 2006), Greece (Pasiouras et al, 2008a), Malaysia (Sufian and Majid, 2006), Spain (Adenso-Diaz and Gascon, 1997), Singapore (Chu and Lim, 1998;Sufian and Majid, 2007), and the US (Eisnbeis et al, 1999). Furthermore, in a cross-country setting, Beccalli et al (2006) provide evidence from the five principal banking sectors (i.e.…”

The Information Risk in the Latest Crisis: A Driver or a Driven Factor for Global Financial Markets Equilibrium?

“…To sum up, more details about different approaches are provided in Table 1 to present a summary of studies in banking industry using DEA. In comparison with all mentioned studies in the banking industry performance, a small number of them investigate the relationship between their results and the stock performance (e.g., Beccalli et al, 2006;Fiordelisi & Molyneux, 2010;Pasiouras, Liadaki, & Zopounidis, 2008). Kirkwood and Nahm (2006) conducted the only study in Australia which examined the relationship between changes in efficiency and stock returns.…”

Share pricing of South African banking groups - Importance of efficiency and earnings per share

“…Researchers that focussed on bank performance and share return relationships were inter alia Adenso-Diaz and Gascon (1997), Chu and Lim (1998), Beccalli, Casu and Girardone (2006), Kirkwood and Nahm (2006), Sufian and Majid (2006), Sufian and Majid (2007), Ioannidis, Molyneux and Pasiouras (2008), Liadaki and Gaganis (2008), Muliaman, Maximilian, Hall, Kenjegalieva, Santoso, Satria and Simper (2008), Pasiouras, Liadaki, and Zopounidis (2008) and Thamron (2009).…”