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Bank efficiency and share performance: evidence from Greece

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  • Fotios Pasiouras
  • Aggeliki Liadaki
  • Constantin Zopounidis

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.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 18 (2008)
Issue (Month): 14 ()
Pages: 1121-1130

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Handle: RePEc:taf:apfiec:v:18:y:2008:i:14:p:1121-1130

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Citations

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Cited by:
  1. Sailesh Tanna & Fotios Pasiouras & Matthias Nnadi, 2011. "The Effect of Board Size and Composition on the Efficiency of UK Banks," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(3), pages 441-462, November.
  2. Fadzlan Sufian & Muzafar Shah Habibullah, 2010. "Developments in the efficiency of the Thailand banking sector: a DEA approach," International Journal of Development Issues, Emerald Group Publishing, vol. 9(3), pages 226-245, July.
  3. Gordon, Leo-Rey, 2009. "Local Banking Competition and Efficiency in the Presence of Offshore Financial Institutions: Evidence from the Caribbean," MPRA Paper 49618, University Library of Munich, Germany.
  4. Fadzlan Sufian & Muhamed Zulkhibri Abdul Majid, 2009. "Bank efficiency and share prices in China: empirical evidence from a three-stage banking model," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 1(1), pages 23-47.
  5. Saadet Kasman & Adnan Kasman, 2011. "Efficiency, Productivity and Stock Performance: Evidence from the Turkish Banking Sector," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(3), pages 355-372, September.
  6. Prodromos D. Chatzoglou & Anastasios D. Diamantidis & Eftichia Vraimaki & Elena Polychrou & Kyriakos Chatzitheodorou, 2010. "Banking productivity: an overview of the Greek banking system," Managerial Finance, Emerald Group Publishing, vol. 36(12), pages 1007-1027, December.
  7. Fotios Pasiouras & Emmanouil Sifodaskalakis, 2010. "Total factor productivity change of Greek cooperative banks," Managerial Finance, Emerald Group Publishing, vol. 36(4), pages 337-353, April.
  8. Fethi, Meryem Duygun & Pasiouras, Fotios, 2010. "Assessing bank efficiency and performance with operational research and artificial intelligence techniques: A survey," European Journal of Operational Research, Elsevier, vol. 204(2), pages 189-198, July.
  9. Muliaman D. Hadad & Maximilian J. B. Hall & Wimboh Santoso & Ricky Satria & Karligash Kenjegalieva & Richard Simper, 2008. "Banking Efficiency and Stock Market Performance: An Analysis of Listed Indonesian Banks," Discussion Paper Series 2008_07, Department of Economics, Loughborough University, revised Aug 2008.
  10. Matthias Nnadi & Nyema Wogboroma & Bariyima Kabel, 2013. "Determinants of Dividend Policy: Evidence from Listed Firms in the African Stock Exchanges," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 725-741, December.
  11. Sufian, Fadzlan, 2009. "Determinants of bank efficiency during unstable macroeconomic environment: Empirical evidence from Malaysia," Research in International Business and Finance, Elsevier, vol. 23(1), pages 54-77, January.
  12. Fadzlan Sufian & Muzafar Shah Habibullah, 2010. "Financial Disruptions and the Evolution of Malaysian Banking Sector’s Efficiency: A Non-Stochastic Frontier Approach," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 166-186.

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