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Efficiency and Stock Performance in European Banking
Author(s) -
Beccalli Elena,
Casu Barbara,
Girardone Claudia
Publication year - 2006
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2006.01362.x
Subject(s) - shareholder , stock (firearms) , market efficiency , monetary economics , economics , business , stock market , efficient market hypothesis , financial economics , econometrics , finance , corporate governance , mechanical engineering , engineering , paleontology , horse , biology
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.