Does bank efficiency matter? Market value relevance of bank efficiency in Australia

View/ Open
Author(s)
Shamsuddin, Abul
Xiang, Dong
Griffith University Author(s)
Year published
2012
Metadata
Show full item recordAbstract
The stochastic frontier analysis is employed to investigate efficiency of publicly listed Australian banks over the period 1985 to 2008. The results suggest that technical, cost and profit efficiency of Australian banks have improved over time. Large banks have attained a higher level of cost efficiency but a lower level of technical efficiency compared to small banks. No substantial difference between the two groups is found in terms of profit efficiency. A panel regression of bank stock return on bank efficiency suggests that an improvement in technical, cost or profit efficiency contributes to the market value of ...
View more >The stochastic frontier analysis is employed to investigate efficiency of publicly listed Australian banks over the period 1985 to 2008. The results suggest that technical, cost and profit efficiency of Australian banks have improved over time. Large banks have attained a higher level of cost efficiency but a lower level of technical efficiency compared to small banks. No substantial difference between the two groups is found in terms of profit efficiency. A panel regression of bank stock return on bank efficiency suggests that an improvement in technical, cost or profit efficiency contributes to the market value of a bank. Thus, the shareholder wealth maximization goal is aligned with the goal of maximizing bank efficiency in the Australian context.
View less >
View more >The stochastic frontier analysis is employed to investigate efficiency of publicly listed Australian banks over the period 1985 to 2008. The results suggest that technical, cost and profit efficiency of Australian banks have improved over time. Large banks have attained a higher level of cost efficiency but a lower level of technical efficiency compared to small banks. No substantial difference between the two groups is found in terms of profit efficiency. A panel regression of bank stock return on bank efficiency suggests that an improvement in technical, cost or profit efficiency contributes to the market value of a bank. Thus, the shareholder wealth maximization goal is aligned with the goal of maximizing bank efficiency in the Australian context.
View less >
Journal Title
Applied Economics
Volume
44
Issue
27
Copyright Statement
© 2012 Taylor & Francis. This is an electronic version of an article published in Applied Economics, Vol. 44 (47), 2012, pp. 3563-3572. Applied Economicsis available online at: http://www.tandfonline.com with the open URL of your article.
Subject
Financial Economics
Applied Economics
Econometrics
Banking, Finance and Investment