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Efficiency and Stock Performance in European Banking

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  • Elena Beccalli
  • Barbara Casu
  • Claudia Girardone

Abstract

Recent competitive pressures have progressively driven banks to strategically focus on generating returns to shareholders. Therefore, the investigation of the determinants of bank performance and their relationship with share prices has become increasingly important. This paper extends the literature on market-based accounting to examine the relationship between stock prices and efficiency. Specifically, it investigates if changes in stock performance can be explained by changes in operating efficiency, derived by parametric and non-parametric methods. Results seem to suggest that changes in efficiency are reflected in changes in stock prices and that stocks of cost efficient banks tend to outperform their inefficient counterparts. Copyright Blackwell Publishers Ltd, 2006.

Suggested Citation

  • Elena Beccalli & Barbara Casu & Claudia Girardone, 2006. "Efficiency and Stock Performance in European Banking," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1-2), pages 245-262.
  • Handle: RePEc:bla:jbfnac:v:33:y:2006-01:i:1-2:p:245-262
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    1. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181.
    2. Belarmino Adenso-Díaz & Fernando Gascón, "undated". "Linking and Weighting Efficiency Estimates with Stock Performance in Banking Firms," Center for Financial Institutions Working Papers 97-21, Wharton School Center for Financial Institutions, University of Pennsylvania.
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