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. Copyright Blackwell Publishers Ltd, 2006.
In light of the policy debate on too-big-to-fail we investigate evidence of economies of scale for 103European listed banks over 2000 to 2011. Using the Stochastic Frontier Approach, the results show that economies of scale are widespread across different size classes of banks and are especially large for the biggest banks. At the country level, banks operating in the smallest financial systems and the countries most affected by the financial crises realize the lowest scale economies (including diseconomies) due to the reduction in production capacity. As for the determinants of scale economies, these mainly emanate from banks oriented towards investment banking, with higher liquidity, lower Tier 1 capital, those that contributed less to systemic risk during the crises, and those with too-big-to-fail status.JEL codes: G21
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.