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DO STOCK MARKETS VALUE EFFICIENCY?
Author(s) -
Amess Kevin,
Girma Sourafel
Publication year - 2009
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2009.00486.x
Subject(s) - economics , productivity , market value added , panel data , market value , empirical evidence , stock (firearms) , stock market , earnings , tertiary sector of the economy , earnings per share , business , monetary economics , econometrics , accounting , macroeconomics , mechanical engineering , paleontology , philosophy , economy , epistemology , horse , biology , engineering
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.