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Efficiency of Listed Banks Operations and Stock Price Movements

Author

Listed:
  • Joseph Kwadwo Tuffour

    (University of Professional Studies, Accra, P. O. Box LG 149, Accra, Ghana)

  • Kenneth Ofori-Boateng

    (GIMPA Business School, P. O. Box AH, Achimota. Accra, Ghana)

  • Williams Ohemen

    (GIMPA Business School, P. O. Box AH, Achimota. Accra, Ghana)

Abstract

Banks efficiency is linked to stock performance. Literature from Ghana on the subject is that most banks are inefficient. What is not clear is whether this inefficiency translates into affecting stock price movements. Therefore, the study examines the effect of efficiency of listed banks operations on stock price movements in Ghana utilizing annual data from 2013-2017 for five banks. The banks input and output variables were used to estimate the efficiency scores, within the Data Envelopment techniques. The results reveal that, the input and output variables accounted for about 80.5% of the banks profitability and 92.5% of the banks cost. The results indicated that, changes in profit efficiency have a significant positive impact on stock returns. However, a significant but negative effect of cost efficiency on stock returns was found. Thus, policy makers should encourage banks to operate efficiently in order to make effective capital allocation decisions.

Suggested Citation

  • Joseph Kwadwo Tuffour & Kenneth Ofori-Boateng & Williams Ohemen, 2020. "Efficiency of Listed Banks Operations and Stock Price Movements," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 219-227.
    • Handle: RePEc:eco:journ1:2020-01-27
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    More about this item

    Keywords

    Banks Efficiency; Stock Price Movements; Data Envelopment Analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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