Bank Efficiency and Share Prices in China: Empirical Evidence from a Three-Stage Banking Model
AbstractThis paper examines for the first time the relationship between China banks’ efficiency and its share price performance. Our analysis consists of three parts. First, we calculate the annual share price returns of the banks for each year between 1997 and 2006. Then we employ Data Envelopment Analysis (DEA) Window Analysis method, first proposed by Charnes et al. (1985) to estimate the efficiency of the banks. Finally, we estimate the annual share price returns over the change in efficiency, while controlling for other bank specific traits. The empirical findings suggest that large China banks have exhibited higher technical and pure technical efficiency levels compared to their small and medium sized bank counterparts, while the medium sized banks have exhibited higher scale efficiency. The relationship between China banks’ efficiency and share price performance suggest that bank efficiency estimates derived from the DEA Window Analysis method contributes significant information towards share price returns beyond that provided by financial information.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 12120.
Date of creation: 01 Mar 2008
Date of revision: 01 Apr 2008
Bank Efficiency; Share Prices; DEA Window Analysis; China;
Other versions of this item:
- 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, January.
- G1 - Financial Economics - - General Financial Markets
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-21 (All new papers)
- NEP-BAN-2008-12-21 (Banking)
- NEP-CNA-2008-12-21 (China)
- NEP-EFF-2008-12-21 (Efficiency & Productivity)
- NEP-TRA-2008-12-21 (Transition Economics)
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