The development of the capital markets is changing the relevance and empirical validity of the efficient market hypothesis. The dynamism of capital markets determines the need for efficiency research. The authors analyse the development and the current status of the efficient market hypothesis with an emphasis on the Baltic stock market. Investors often fail to earn an excess profit, but yet stock market anomalies are observed and market prices often deviate from their intrinsic value. The article presents an analysis of the concept of efficient market. Also, the market efficiency evolution is reviewed and its current status is analysed. This paper presents also an examination of stock market efficiency in the Baltic countries. Finally, the research methods are reviewed and the methodology of testing the weak-form efficiency in a developing market is suggested.
Abstract:The purpose of this study is to examine the efficiency of the banks in Lithuania by employing the DEA method and evaluate bank performance in a low interest rate environment. The efficiency scores were calculated with a non-parametric frontier input-oriented DEA technique with the variable returns to scale (VRS) and the constant returns to scale (CRS) assumptions. Five alternative models with different input-output combinations were developed, based on production, profitability and intermediation dimensions. The main bank profitability measure-the return on assets (ROA) ratio-was employed to validate the results obtained using the DEA method. The Lithuanian bank's efficiency analysis based on the VRS assumption shows that better results are demonstrated by the local banks. The technical efficiency analysis based on the CRS assumption shows other results: the banks owned by the Nordic parent group and the branches have higher pure efficiency than local banks and have success at working at the right scale. Based on this, it stated that during the 2012-2016 period the larger Lithuanian banks (subsidiaries) applied a more appropriate business model than smaller (local) banks operating in Lithuania. Additionally, this research contributes to the scholarly literature in the field of determinants of bank business performance in concentrated markets dominated by foreign banks and, in particular, from one region.
Purpose -Th e banking and fi nancial sector is a dynamic sector that regularly goes through a series of structural changes. Global bank consolidation an d concentration processes have prompted a lively discussion on the part of scholars and practitioners regarding the infl uence of concentration on the effi ciency and competition levels in the banking system, the fi nancial and macroeconomic stability of countries and the growth of economies. It has been noted that the banking sector tolerates high levels of concentration rather well compared to other business sectors, thanks to the apparent benefi ts of concentration on the increasing stability of the fi nancial system. Th e aim of this article is to identify underlying causes affecting the mergers and acquisitions in banking and to assess their eff ect on the domestic fi nancial system. Design/methodology/approach -Th e authors used qualitative and quantitative methods of study in analysing the impact of bank mergers and acquisitions on the country's fi nancial system. Th e qualitative analysis has allowed the authors to present their own interpretation of the issue at hand, and has given them a chance to approach the problem of the study holistically. Th e quantitative study has provided a basis for analysing dynamic regularities, performing and comparing calculations, assessing data interrelation and reliability. Th e article includes logical analysis and synthesis of studies dealing with bank mergers and acquisitions. To identify the potential elements that lead to stability in the fi nancial system, and the possible impact that the on-going consolidation process might have on the banking sector, the authors have carried out expert analysis. Findings -Mergers and acquisitions in banking take place to enhance the wellbeing of shareholders and to attain an economic eff ect; the aspect of stability in mergers and acquisitions is short-lived and is usually inspired by the government. Lithuania's modern banking market has evolved through mergers and acquisitions; strategic investors have helped countries with transitional economies ensure the stability of their banking systems and capitalise on economies of scale. Several large banks operating in a small open economy (and a transitional economy in particular) provide the backbone for the stability of its fi nancial sector. Practical implications -Th is research enriches and enhances the potential of Lithuanian science dealing with the topic of banking operations and risk management in the context of the fi nancial system stability. Th e results produced by this research could be applied to analyse and assess consolidation processes that could take place on the markets and in particular, in small open economies. Originality/Value -Th is article dealing with the impact of mergers and acquisitions of banks on the country's fi nancial system is a new and original piece of scientifi c work that evaluates the mutual ties of banks' mergers and acquisitions, as well as their eff ect on the domestic fi nancial system. Th ...
The changes in farm structure have been observed in Lithuania as well as in other Central and Eastern European countries. These changes, to a high extent, have been driven by decreasing profitability of the small farms. In this paper, we look into the changes in the profitability of Lithuanian family farms across different farm size groups. Farm size is measured in terms of the standard output. The period covered is 2005–2016. The index decomposition analysis model and Shapley value are adapted for the analysis. The proposed framework ensures complete decomposition among other desirable properties. The decomposition of the changes in profitability was carried out following the DuPont identity. The results suggest that for small (respectively large) farms the asset turnover (respectively profit margin) component appear more important, whereas the leverage effect remained minimal irrespectively of the farm size group.
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