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Do Stock Markets Value Firm-Level Technical Efficiency? Some UK Evidence


  • Sourafel Girma


  • Kevin Amess



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. The main findings are: (1) changes in technical efficiency and labour productivity are reflected in changes in the value of manufacturing firms, and (2) changes in earnings per share and return on capital employed explain changes in the value of service sector firms but technical efficiency and labour productivity do not. For manufacturing firms, the evidence is consistent with the stock market valuing the adoption of better management practices that lead to better resource utilisation.

Suggested Citation

  • Sourafel Girma & Kevin Amess, 2004. "Do Stock Markets Value Firm-Level Technical Efficiency? Some UK Evidence," Discussion Papers in Economics 04/23, Division of Economics, School of Business, University of Leicester.
  • Handle: RePEc:lec:leecon:04/23

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    Firm value; resource utilisation;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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