Journal of
Economics and International Finance

  • Abbreviation: J. Econ. Int. Finance
  • Language: English
  • ISSN: 2006-9812
  • DOI: 10.5897/JEIF
  • Start Year: 2009
  • Published Articles: 282

Full Length Research Paper

Bank efficiency and stock returns

David Sarpong*
  • David Sarpong*
  • Accountancy Department, Accra Polytechnic, Ghana.
  • Google Scholar
Ernest Christian Winful
  • Ernest Christian Winful
  • Accountancy Department, Accra Polytechnic, Ghana.
  • Google Scholar
Jones Ntiamoah
  • Jones Ntiamoah
  • Accountancy Department, Accra Polytechnic, Ghana.
  • Google Scholar


  •  Received: 06 January 2016
  •  Accepted: 30 August 2016
  •  Published: 28 February 2017

Abstract

Increased competition and globalization have made it imperative for banks to achieve high efficiency in order to generate required returns. This paper investigates the relationship between bank efficiency estimates, derived from both Stochastic Frontier Approach (SFA) and Data Envelopment Analysis (DEA) and share prices of banks listed on the Ghana stock exchange. The results give an indication that changes in cost and profit efficiency are reflected in stock performance and that efficiency is directly observed by the public and reflected in share prices, though SFA efficiency scores are not reflected in share prices as being equally important as compared to DEA efficiency scores.

Key words: Efficiency, share price changes, Stochastic Frontier Approach (SFA), data envelopment analysis (DEA).