Banks' Efficiency and Stock Prices in Emerging Markets: Evidence from Malaysia

Abstract

This paper empirically investigates the X-efficiency and P-efficiencies of Malaysian banks listed in the Kuala Lumpur Stock Exchange (KLSE) during 2002–2003 by applying a non-parametric Data Envelopment Analysis (DEA) method. We find that during the period of study, the X-efficiency of Malaysian listed banks was on average significantly higher compared to the P-efficiencies. The P-inefficiency was largely due to inefficient production of profits rather than the wrong scale of operations. Our results also suggest that the large banking groups were on average more X-efficient whereas the smaller banking groups were found to be more P-efficient. We further link the X-efficiency and P-efficiency to the respective banks' share prices and find that the stock prices of Malaysian banks react more towards the improvements in P-efficiency rather than the improvements in X-efficiency.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 40 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.