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Do Stock Markets Value Efficiency?

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  • Kevin Amess
  • Sourafel Girma

Abstract

An empirical model determining the relationship between changes in firm‐level productivity and changes in firm value is estimated using an unbalanced panel of 706 public limited companies observed over the period 1996–2002. We find a positive relationship between efficiency and the market value of manufacturing sector firms controlling for traditional accounting measures of performance such as earnings per share and the return on capital employed. This evidence is consistent with the stock market valuing the adoption of better management practices that lead to better resource utilisation. By contrast, we find no such evidence for service sector firms.

Suggested Citation

  • Kevin Amess & Sourafel Girma, 2009. "Do Stock Markets Value Efficiency?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(3), pages 321-331, July.
  • Handle: RePEc:bla:scotjp:v:56:y:2009:i:3:p:321-331
    DOI: 10.1111/j.1467-9485.2009.00486.x
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    File URL: https://doi.org/10.1111/j.1467-9485.2009.00486.x
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    References listed on IDEAS

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