Australian Banking Efficiency and its Relation to Stock Returns
AbstractThis paper considers cost and profit efficiency for Australian banks between 1995 and 2002. Data Envelopment Analysis (DEA) is used to construct an efficient frontier for ten banks listed on the Australian Stock Exchange. Empirical results indicate the major banks have improved their cost and profit efficiency, while the regional banks have experienced little change in cost efficiency, and a decline in profit efficiency. This result provides interesting insights into the structure of the Australian banking industry. Malmquist indices indicate technological change is the dominant source of improvements in total factor productivity over the period. An attempt is made to relate the changes in efficiency to stock returns, using a method superior to that previously adopted. Results indicate that for our sample changes in firm efficiency are reflected in stock returns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Macquarie University, Department of Economics in its series Research Papers with number 0508.
Length: 26 pages.
Date of creation: May 2005
Date of revision:
DEA; Banks; Profit Efficiency; Cost Efficiency;
Other versions of this item:
- Joshua Kirkwood & Daehoon Nahm, 2006. "Australian Banking Efficiency and Its Relation to Stock Returns," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 253-267, 09.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-05 (All new papers)
- NEP-EFF-2006-03-05 (Efficiency & Productivity)
- NEP-FIN-2006-03-05 (Finance)
- NEP-FMK-2006-03-05 (Financial Markets)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Sturm, Jan-Egbert & Williams, Barry, 2008. "Characteristics determining the efficiency of foreign banks in Australia," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2346-2360, November.
- 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.
- Abdul Majid, Muhamed Zulkhibri & Sufian, Fadzlan, 2008. "Bank Efficiency and Share Prices in China: Empirical Evidence from a Three-Stage Banking Model," MPRA Paper 12120, University Library of Munich, Germany, revised 01 Apr 2008.
- Avkiran, Necmi K. & Morita, Hiroshi, 2010. "Benchmarking firm performance from a multiple-stakeholder perspective with an application to Chinese banking," Omega, Elsevier, vol. 38(6), pages 501-508, December.
- Avkiran, Necmi K. & Morita, Hiroshi, 2010. "Predicting Japanese bank stock performance with a composite relative efficiency metric: A new investment tool," Pacific-Basin Finance Journal, Elsevier, vol. 18(3), pages 254-271, June.
- 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.
- 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.
- Werner, Karl & Moormann, Jürgen, 2009. "Efficiency and profitability of European banks: how important is operational efficiency?," Frankfurt School - Working Paper Series 111, Frankfurt School of Finance and Management.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Boneham).
If references are entirely missing, you can add them using this form.