Banks’ Efficiency and Share Prices in an Emerging Market: A DEA Window Analysis Approach

Abstract

This paper attempts to investigate the long-term trend in efficiency change of listed Malaysian commercial banks during the period of
1994-2003. Utilising the non-parametric Data Envelopment Analysis (DEA) window analysis technique, our results suggest that during the
period of study, listed Malaysian commercial banks have exhibited an average overall efficiency of 92.4% and that the inefficiencies were
largely attributed to pure technical (input related) rather than scale (output related). During the period of study, listed large Malaysian
commercial banks were found to have outperformed their small and very large counterparts. We further employed a panel regression analysis
to test the relationship between share performance and banks efficiency. The results suggest that share price performance of banks with higher
X-efficiency scores tend to outperform the share performance of banks with lower X-efficiency scores.