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Asian Journal of Research in Business Economics and Management
Year : 2014, Volume : 4, Issue : 8
First page : ( 82) Last page : ( 94)
Online ISSN : 2249-7307.

Cost Efficiency of Listed Indian Banks and Its Relation to Stock Performance

Mr. Mishra Ashok Kumar*, Dr. Panda Abhaya Kumar**, Dr. Mohapatra B. B.***

*Assistant Professor, IMIS, Bhubaneswar, India

**Principal, BCET, Balasore, India

***Reader, Department of Business Administration, Fakir Mohan University, Balasore, India

Online published on 6 August, 2014.

Abstract

This paper empirically estimates and analyzes, for the first time in India, the cost efficiency scores of banks listed on National Stock Exchange-NSE during 2004 – 2012 using non parametric data envelopment analysis (DEA). Subsequently efficiency scores were regressed upon the stock prices to determine the explanatory power of efficiency scores on stock price returns. This exercise is a clear indication towards the shareholders’ concern towards the efficient units in the capital market. It becomes pertinent in an era, when banks also visit the capital market space for raising capital from shareholders, for the shareholders’ to evaluate the efficiency to anticipate an appreciation in the return. The average technical efficiency scores increased from 0.866 to 0.953 indicating improved cost efficiency in these banks under study. The regression results indicate a positive and statistically significant relationship between cost efficiency of the banks and stock returns.

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Keywords

Indian Banks, DEA Model, Cost Efficiency, Stock Price.

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