Abstract

This study measures the status of technical efficiency of companies in Dhaka stock exchange (DSE) for panel data using the stochastic frontier production function, incorporating technical inefficiency effect model. For this study, we used the data collected from DSE market consisting 94 companies in Bangladesh for the period of 2000 to 2008. It was observed that the inefficiency increased over the reference period and translog production function was more preferable than Cobb-Douglas production function. This study showed that the estimated year-wise average efficiency of companies in DSE market was 0.8782 while group-wise average efficiency was 0.8571. At the company group level, Group-A companies was most efficient than the other two groups. The most efficient company was ICB and the most inefficient company was Bextex limited.

Key words: Stochastic frontier model, translog production, stock market efficiency, Dhaka stock exchange, panel data.