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Productivity and efficiency change and shareholder value: evidence from the Spanish banking sector

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  • Isidoro Guzman
  • Carmelo Reverte

Abstract

Productivity change and shareholder value have been analysed in the banking sector in the last few years, although it should be noted that these two important aspects have been studied separately. In this regard, the main contribution of our study is to link these two lines of research by verifying whether those banks characterized by higher levels of efficiency and productivity change have a higher shareholder value. To measure changes in efficiency and productivity we use the Malmquist nonparametric technique, which is calculated from Data Envelopment Analysis (DEA) linear programming approach. The Malmquist total factor productivity index enables separation of the 'catching up' effect, i.e. changes over time in technical efficiency, from 'technological change', i.e. the shift of best practice frontier over time due to technological progress. Our results for a sample of listed Spanish banks in the period 2000 to 2004 confirm that those banks with higher efficiency and productivity changes have a higher shareholder value, even after controlling for the impact of traditional measures of performance, such as return on assets.

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  • Isidoro Guzman & Carmelo Reverte, 2008. "Productivity and efficiency change and shareholder value: evidence from the Spanish banking sector," Applied Economics, Taylor & Francis Journals, vol. 40(15), pages 2037-2044.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:15:p:2037-2044
    DOI: 10.1080/00036840600949413
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    1. Berger, Allen N. & Mester, Loretta J., 2003. "Explaining the dramatic changes in performance of US banks: technological change, deregulation, and dynamic changes in competition," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 57-95, January.
    2. Allen N. Berger & Loretta J. Mester, 1999. "What Explains the Dramatic Changes in Cost and Profit Performance of the U.S. Banking Industry?," Center for Financial Institutions Working Papers 99-10, Wharton School Center for Financial Institutions, University of Pennsylvania.
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    Cited by:

    1. Francesco Aiello & Graziella Bonanno, 2018. "On The Sources Of Heterogeneity In Banking Efficiency Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 194-225, February.
    2. Rangkakulnuwat, Poomthan & Wang, H. Holly, 2011. "Productivity growth decomposition with FE-IV approach: Rethinking Thai commercial banks after the financial crisis," Economic Modelling, Elsevier, vol. 28(6), pages 2579-2588.
    3. Fethi, Meryem Duygun & Pasiouras, Fotios, 2010. "Assessing bank efficiency and performance with operational research and artificial intelligence techniques: A survey," European Journal of Operational Research, Elsevier, vol. 204(2), pages 189-198, July.
    4. Abul Shamsuddin & Dong Xiang, 2012. "Does bank efficiency matter? Market value relevance of bank efficiency in Australia," Applied Economics, Taylor & Francis Journals, vol. 44(27), pages 3563-3572, September.
    5. Boon L Lee, 2012. "Efficiency and Productivity of Singapore's Manufacturing Sector 2001-2010: An analysis using Simar and Wilson's (2007) bootstrapped truncated approach," School of Economics and Finance Discussion Papers and Working Papers Series 283, School of Economics and Finance, Queensland University of Technology.
    6. Maradin, Dario & Prohaska, Zdenko & Suljic Nikolaj, Stella, 2019. "The Productivity Of European Banking Sector: A Review Of The Post-2000 Literature," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 10(2), pages 249-257.
    7. Boon L. Lee, 2013. "Productivity, technical and efficiency change in Singapore's services sector, 2005 to 2008," Applied Economics, Taylor & Francis Journals, vol. 45(15), pages 2023-2029, May.
    8. Adnan Kasman & Saadet Kasman & Duygu Ayhan & Erdost Torun, 2013. "Total factor productivity and convergence: evidence from old and new EU member countries' banking sectors," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(sup1), pages 13-35, June.
    9. Kao, Chiang, 2010. "Malmquist productivity index based on common-weights DEA: The case of Taiwan forests after reorganization," Omega, Elsevier, vol. 38(6), pages 484-491, December.
    10. Francesco Aiello & Graziella Bonanno, 2016. "Efficiency in banking: a meta-regression analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 112-149, January.
    11. Andriyani, Lilik & Usman, Nurodin & Pambuko, Zulfikar Bagus, 2020. "Antecedents of Social Funds Productivity of Islamic Banks in Indonesia," OSF Preprints 258jk, Center for Open Science.
    12. Barros, Carlos Pestana & Managi, Shunsuke & Matousek, Roman, 2009. "Productivity growth and biased technological change: Credit banks in Japan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 924-936, December.
    13. Hussain Haroon & Md-Rus Rohani & Al-Jaifi Hamdan Amer & Hussain Rana Yassir, 2022. "Determinants of Corporate Pay-Out Policy and the Moderating Effects of Firm's Growth: Evidence from Pakistan," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 32(3), pages 65-101, September.
    14. Chiu, Yung-ho & Luo, Zhengying & Chen, Yu-Chuan & Wang, Zebin & Tsai, Min-Pei, 2013. "A comparison of operating performance management between Taiwan banks and foreign banks based on the Meta-Hybrid DEA model," Economic Modelling, Elsevier, vol. 33(C), pages 433-439.

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