Bank Efficiency and Share Performance: Evidence from Greece

Applied Financial Economics, Vol. 18, No. 14, pp. 1121-1130, 2008

1 Pages Posted: 6 Feb 2007 Last revised: 15 Jul 2009

See all articles by Fotios Pasiouras

Fotios Pasiouras

GSCM-Montpellier Business School

Aggeliki Liadaki

Technical University of Crete (TUC) - Department of Production Engineering and Management

C. Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management

Abstract

This paper examines for the first time the association between the efficiency of Greek banks and their share price performance. Our analysis consists of three parts. First, we calculate the annual share price returns of the banks for each year between 2001 and 2005. Then we use data envelopment analysis to estimate the efficiency of the banks between 2000 and 2005. Finally, we regress the annual share price returns over the annual change of efficiency while controlling for changes in banks' size and risk. We find that the average technical efficiency under constant returns to scale is 0.931 and increases to 0.977 under variable returns to scale, resulting in a scale efficiency of 0.953. The regression results indicate a positive and statistically significant relationship between annual changes in technical efficiency and stock returns, while changes in scale efficiency have no impact on stock returns.

Keywords: Banks, data envelopment analysis, efficiency, stock returns

JEL Classification: G21, C24, C67, D61

Suggested Citation

Pasiouras, Fotios and Liadaki, Aggeliki and Zopounidis, Constantin, Bank Efficiency and Share Performance: Evidence from Greece. Applied Financial Economics, Vol. 18, No. 14, pp. 1121-1130, 2008, Available at SSRN: https://ssrn.com/abstract=961259

Fotios Pasiouras (Contact Author)

GSCM-Montpellier Business School ( email )

2300, Avenue des Moulins
Montpellier, 34185
France

Aggeliki Liadaki

Technical University of Crete (TUC) - Department of Production Engineering and Management ( email )

University Campus
Chania
Crete, 73100
Greece

Constantin Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management ( email )

University Campus
Chania
Crete, 73100
Greece
+30 28210 37236 (Phone)
+30 28210 69410, 37236 (Fax)

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