Relative profitability and stock market performance of listed commercial banks on the Athens Exchange: a non-parametric approach

The purpose of this paper is to evaluate the performance of a sample of thirteen commercial banks listed on the Athens Exchange by applying a two-step procedure. In the first step, data envelopment analysis (DEA) is used to model performance in two dimensions: profitability efficiency and efficiency in market value generation. In the second step, a tobit model is bootstrapped in order to identify the drivers of performance. The contribution of this paper to the literature is twofold: to improve on the existing methods employing a new variant of DEA profitability approach by using burden as an (undesirable) output variable in modelling profitability efficiency and to better explain (from a computational statistics perspective) DEA efficiency levels in both dimensions examined by employing a bootstrapped tobit model. Performance inefficiency is uncovered in both dimensions, but the real problem of inefficiency of the sampled banks is the lower level of performance in market value generation, rather than profitability. Results do not point out positive links between profitability efficiency and performance in the stock market. Relatively large banks exhibit better performance on profitability; most of them reached their optimum size scale, whereas they tend to have the worst performance with respect to the stock market. Some smaller banks seem to have some prospects in market value generation, while performance in the stock market can be explained by cost to income ratio.