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Asian Research Consortium

Asian Journal of Research in Business Economics and Management


Vol. 4, No. 8, August 2014, pp. 82-94.
ISSN 2249-7307

Asian Journal
of Research in
Business Economics
and
Management
www.aijsh.org

Cost Efficiency of Listed Indian Banks and Its Relation to


Stock Performance
Mr. Ashok Kumar Mishra*; Dr. Abhaya Kumar Panda**;
Dr. B. B. Mohapatra***

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*Assistant Professor,
IMIS,
Bhubaneswar, India.
**Principal,
BCET,
Balasore, India.
***Reader,
Department of Business Administration,
Fakir Mohan University,
Balasore, India.

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.

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


________________________________________________________________________________

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Mishra et al. (2014). Asian Journal of Research in Business Economics and Management,
Vol. 4, No. 8, pp. 82-94

I.

Introduction

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Efficiency measurement in Indian banking industry is important for two important reasons. First, it
helps in bench marking of an individual bank against best practice bank. Secondly, it helps to
evaluate the impact of various policy measures on the efficiency and performance of these entities.
Banks take part in payment and settlement systems. The efficiency of banking institutions will bear
a direct bearing on the efficiency of economic transactions in general. In fact the financial sectors
reforms were directed towards the operational efficiency of banking sector as a whole and as well
as of individual institutions. It has been noticed that, the high cost of banking is due to inefficiency
in the system.
However, measurement of efficiency is not an easy task because it is difficult to define and measure
both the inputs and outputs of a bank. Also banks are not homogeneous with respect to the types of
output actually produced. There is also question of various concepts of efficiency. Also there are
various approaches for measurement of efficiency. Once efficiency scores are found out, then
causes of inefficiency can be ascertained and corrective measures are attempted. We try to measure
efficiency by using non parametric data envelopment analysis (DEA). As a result of liberalization
a bank is now going to capital market to raise equity and there by subjected to greater degree of
market risk faced ever before. A greater degree of market discipline, accountability and
transparency is required in the day-to-day operations of bank to inject efficiency.
Large scale corporate debt restructuring following a sharp rise in the number of bad loans on the
books of banking system serves to focus attention on banks need to raise capital. It is estimated
that banking sector may need an additional capital of Rs.1.60 1.75 lakh crore by March 2018
(source: Economic Times) to conform to Basel III norms on capital adequacy, even without
factoring in providing for bad loans. Yet another contribution to the pressure on banks to raise
capital could be from the ongoing effort of financial inclusion. Bank lending is 50 per cent of GDP
in India, while it is upwards of 100% of GDP for mature market economies. It is not like we are
not dependant on credit, but it is just that enterprises, particularly in small and medium segments.
Source their credit from non-banking sources. If financial inclusion drives succeed in providing
larger segments of the economy access to the banking system, bank lending would go up sharply,
raising the demand for capital in proportion. Promoters of private banks may be able to mobilize
the required additional capital, but can the government, the majority owner of PSBs more
importantly, is that the best use of taxpayer money? Should the government give up majority
ownership and allow public sector banks to raise capital from the investing public, directing its own
stake below 51%? So here comes the importance of the efficient banks. When they come to the
public for raising capital they must take care of steady future cash flows to satisfy the existing
shareholders and also to attract new shareholders. So the market value of the share is guided by the
efficient performance of individual banks. The rest of the paper is organised as follows. Section II
includes briefly about the evolution of banking system in India; past, present and the way ahead.
Section III includes relevant literature in global and Indian context. Section IV includes
methodology. Section V tells about analysis and findings and Section VI concludes.

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II.

Banking System in India-An Overview

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Indian banking system consists of commercial and co-operative banks, of these two former account
for 98 per cent of banking system assets. As per the ownership structure, the commercial banks can
be categorized into three types Government owned PSBs, Private Sector under Indian ownership
and foreign banks. The 27 PSBs (Public Sector Undertakings) dominate the Indian banking
system, accounting for a little more than 80 per cent of commercial banking assets.
There has been plethora of changes in the regulatory and supervisory frameworks since 1991, when
the liberalization process started. It may be referred to the fact that in 1950, the financial system
was liberal which was evident from the fact that there was limited control over interest rates and
low statutory pre-emption of funds. The lopsided finding of All India Rural Credit Survey
Committee [RBI 1954] of inequitable distribution of bank credit raised misgivings about the
ability of markets to efficiently allocate resources. As a result the government took steps in
controlling the credit allocation process to ensure adequate flow of credit into genuinely productive
activities in conformity with the plan priorities. After that control on lending rates were introduced,
liquidity requirements were raised and a system of development banks catering to the needs of
agriculture and industry were established. This process culminated with the nationalization of 14
commercial banks in 1969 and other phase of nationalization with 6 banks in the year 1980.
The era after nationalization saw branch expansion to reach out the common man. The exercise
was aimed not only at moping up savings but also to meet the credit gap in agriculture, retail trade
and small scale sector. Thereby, bringing large spectrum of economic activities within the domain
of banking system. This act prompted policy makers to park 40 per cent banks credit portfolio to
the preferred or priority sector.
Also some quantitative restrictions were imposed in the form of CRR and SLR. The CRR, at the
time of 1991, was at its peak of 15 per cent of NDTL, while investment in the Government
instrument in the form of SLR was 38.5 per cent. Banks were restricted to capital market as it will
endanger the depositors money. Banks were functioning in an administered interest rates regimes.
There was no competitive pressure from private banks as entry norms were very high. This
environment resulted in deterioration of credit quality and subsequent recovery mechanism. This
gave rise to piling of non performing assets (NPA) in the system. As a result banks financial
health took a beating from time to time, being the owner, the Government capitalized some ailing
banks for expansion activities. Frequent re-capitalization put pressure on the fiscal policy.
In the early nineties, in 1991-92, a process of liberalization was undertaken, which was aimed at
creating a vibrant and resilient banking system. The underlying objective was to make banking
system more market oriented and also to be making them free from the micromanagement of the
central bank. The constant change in the business dynamics due to integration with global world,
the policy planner also thought of aligning the domestic system with global environment. To the
effect for some more reforms a second government appointed committee on banking was set up to
chart a road map [Narashimam Committee II, GOI 1998). The committee prescribed a slew of
reforms. Some of them are like, reduction in CRR & SLR rates, so that lendable resources of bank
will be more. To give flexibility to banks to manage the interest rates of both sides of balance
sheets. This suggestion did away with the administered interest rates. Prudential measures like
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Mishra et al. (2014). Asian Journal of Research in Business Economics and Management,
Vol. 4, No. 8, pp. 82-94

income recognition, capital adequacy requirements, loan provisioning, asset classifications,


exposure norms and accounting norms were stipulated. Competition was brought in allowing
liberal entry of private and foreign banks.
Until 1991-92, PSBs were owned by the government. After the initiation of reform process
Government amended several acts to enable Government owned banks to raise capital up to 49
percent by accessing capital market.

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III.

Literature Review

Many research studies have shown light on the efficiency of financial institutions with emphasis on
US banking system. Berger and Humphery (1997) have reviewed 130 studies that have been
carried out in 21 countries. They have analysed different approaches used by authors and found
DEA being the most popular approach used. In the recent past, some studies have been conducted
in Europe, USA and other developed countries. There has been limited number of studies
conducted in developing countries. Also there have been some efforts to measure efficiency of
banking system in developing countries like India. Attaullha et al (2006) ; Shah and Ravishankar
(2000); Das (1997) , Sathey (2001) ; Mukherjee et al (2002) carried out study in Indian context.
The most commonly used approach is constant returns to scale. Also some studies used variable
return to scale. This was seen in Bhattacharya et al (1997) , Mukherjee et al (2002) and Kumar and
Verma (2003) . Some studies have taken into account all the three types of ownership public,
private and foreign that exist in the Indian banking environment. These kinds of studies carried
out by Bhattacharya et al (1997), Das (2000), Pal et al (2000) and Sathey (2002). Others take into
account only domestic banks. Studies have been carried out by Noulas and Ketkar (1996),
Bhattacharya et al (1997), Pal et al (2000), Mukherjee et al (2002) and Sathey (2001). Das et al
(2005), Das and Ghosh (2009) studied about cost and profit efficiency in Indian banking
companies. Ram Mohan and Ray (2004) also studies cost, revenue and profit efficiency. Sanjeev
(2006) studied technical efficiency of Indian Banking Companies. Rezvaniar et al (2008) carried
out a study on efficiency change, technological progress and productivity growth in Indian banks.
These kinds of studies only restricted themselves only finding out efficiencies in banks. But some
more literatures have shown the linkages of efficiency with the return from the investment by
investing in the shares of the listed banks. Though worldwide banking is well regulated, but
regulators allowed banks to go to public for rising of finances in order to carry out their lending
programme, also for a healthy balance sheet.

International Literature
Kirkwood & Narhm (2006) studied the impact of efficiency of banks on the share prices and it was
found that changes in profit efficiency are statistically significant in determining the stock returns
of banks. Chu & Lim (1998) used data envelopment analysis in banks of Singapore and evaluated
cost and profit efficiencies of a panel of six Singapore banks followed up by a regression analysis
with their share prices and it was found that percent changes in the prices of banks shares reflect
percentage changes in the profit efficiency. Erdem and Erdem (2008) studied technical, allocate
and economic efficiency scores of the banks whose stocks traded in Istanbul Stock Exchange,
Greece. Economic efficiency scores of banks obtained from DEA model was related to their stock
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prices to determine whether there is explanatory power of efficiency scores on stock prices returns.
Beccalli et al (2006) carried out on investigation for European banks of determinants of bank
performance and their relationship with share prices specifically they investigated if changes in
stock performance can be explained by changes in operating efficiency derived by parametric and
non parametric methods. Result seemed to suggest that changes in efficiency are reflected in
changes in stock prices.
Pasiouras et al (2008) examined the association between efficiency of Greek banks and their share
price performance. The regression results indicated a positive and statistically significant
relationship between annual changes in technical efficiency and stock returns, while changes in
scale efficiency have no impact on stock returns. Suifan and Majid (2007) conducted a study with
banks in Singapore by using DEA window analysis method to investigate the long-term trend in
efficiency change of Singapore Commercial Banks during 1993-2003. The study established
statistical relationship between cost efficiency and share price performance by employing panel
regression analysis. The evidence seemed to indicate that changes in stock prices tended to reflect
cost efficiency but with small degree of reaction. That suggested that stock of cost efficient banks
to some extent out performed cost inefficient banks.
Thus we may conclude that in the Indian context no study has been undertaken to find out whether
share prices are being impacted by the cost efficiency of listed banks.

IV.

Data and Methodology

Efficiency is a relative concept since its measurement requires a standard performance against
which the success / failure of the firm is determined. Contemporary empirical result showed by
employing parametric or non-parametric frontier technique to find out efficient units on the
efficient frontier as an indication towards a optimal utilization of resources. The parametric
approach talks about a pre-specified stochastic production, cost or profit function, but the nonparametric data envelopment analysis (DEA) does not require this kind of specification for creation
of efficient frontier. Instead the frontier is constructed through a piece wise linear combination of
actual input and output correspondence set that envelops the data of all the firms in the sample. So,
efficiency measurement is not disturbed by the possible misspecification of the functional form.
This study employs the non parametric DEA approach to estimate technical and cost efficiency of
commercial banks in India, particularly listed on NSE. The DEA introduced by Charnes, Cooper
and Rhodes (1978) and further extended to non constant reforms technology by Bankers, Charnes
and Cooper (1984) provides a step to construct the production possibility step from an observed set
of data of inputs outputs. It is assumed that the data set must be convex and inputs and outputs are
freely disposable. This gives rise to a efficient frontier taking into account all the available decision
making units (DMUs). Any DMUs lie on the efficient frontier is termed as efficient unit, or else it
is identified as inefficient. The data are enveloped in such manner that, the radial distances to the
frontier surface are minimized and efficiency scores are found out by solving a linear programming
problem.

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Mishra et al. (2014). Asian Journal of Research in Business Economics and Management,
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Consider an industry producing m outputs from n inputs. An input output bundle (x, y) is
considered feasible when the output bundle y can be produced from the input bundle x. The
technology faced by firms in the industry can be described by the production possibility set
T = {(x, y): y can be produced from x} .. (1)
In the single out put case, one can conceptualize the production function
F (x) = max y: (x, y) T (2)
In the multiple output case, frontier of the production possibility set is the production
correspondence F (x, y) = 1

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Suppose that (xj, yj) is the input output bundle observed for firm J (J = 1,2 .. N). these input and
output bundles are all feasible. Then the smallest production possibility set satisfying the
assumptions of convexity and free disposability that includes these observed bundles is
S = {(x, y) : x

xj ; y

yj ;
J=1

0; (J = 1, 2,. N) . (3)
J=1

J=1

The set S is also known as the free disposal convex hull and becomes the reference technology.
(Ray, S.C. 2004)

Cost Efficiency
Suppose the input price vector faced by the firm with input-output bundle
actual cost is

( x 0 y 0 ) is w. Then the

C 0 w' x 0 . The minimum cost of producing the target output is

C (w, y 0 ) min w, x : ( x, y 0 ) T .
With reference to the production possibility set S, the minimum cost is obtained as C*=min wx s.t.
N

j 1

j 1

j 1

j y j y 0 ; J x j x; j 1; j 0; ( j 1,2,...N )...............(4)
As it is the measurement of cost efficiency of DMUs the return to scale assumed is VRS. Given
that linear programming can not suffer from such statistical problems as simultaneous equation
bias, the choice of appropriate orientation is not crucial as it is in the econometric estimation case.
To find out the efficiency scores of these 27 banks,DEA-SOLVER LV_V has been used.

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Links to Share Prices


After finding out the technical efficiencies, now in this section it will be linked to the share prices
of banks. If there exists explanatory power it indicates that the market is not semi strong from
efficient (reflect all publicly available) information. Sharpe-Linter excess returns version of the
capital asset pricing model was built to determine the stock price relation to efficiency scores. Cost
efficiency scores of t-1th year were added as an independent variable to the above model to
statistically test whether there is explanatory power of cost efficiency on the stock price return and
specified as,

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esrit i i emrt 1 it .. (5)


Where esrt is the excess return on stocki in time t (excess return is the return on stock i minus risk
free rate. 10 year Government bonds yield is used as proxy for risk free rate. emri t-1 is the excess
market and ceit-1 is the cost efficiency in period t-1. eit is the serially uncorrelated random error
term. CNX Nifty 50 index is used for excess market return. In order to find the result of the
regression SPSS 16.0 has been used.

Definition of Bank Inputs, Outputs and Data


The choice of variables in efficiency studies significantly affects the result. It also becomes
complex affair, when data availability becomes question mark. The rate of commercial banks is
limited to mobilizing deposits from individuals, households to finance the investment needs of
firms and consumption needs of individuals .Three approaches dominate literature: the production
approach, the intermediation approach and user cost approach. Under production approach
propagated by Benston (1965), banks are considered to be service providers to customers. The
input considered under this approach includes physical variables like labour, material, space or
information system or their associated costs, as only physical inputs are needed to perform
transactions, process financial documents and offering counseling and advisory services. Under
intermediation approach, financial institutions are regarded as an intermediary between savers and
seekers. Banks produce intermediation services through the collection of deposits and other
liabilities and their application in interest earning assets, such as loans, securities and other
investments. This approach includes both operating and interest expenses as inputs, where as loans
and other major assets as outputs. There is however a controversy is brewing, whether deposits
should be treated as input or output. Deposits and other liabilities, together with real resources
(labour and capital) are defined as inputs, where as the output set includes only bank assets such as
loans (Sealy & Lindsey, 1977). One approach is called user cost approach determines whether a
financial product is an input or output. On the basis of its net contribution to bank revenues, if the
financial returns on asset exceed the opportunity cost of the funds, then they are considered as
outputs; otherwise inputs (Han Cock, 1985).Which approach to be used depends upon the
circumstances so as per the present study the intermediation approach is considered? For our study
we assume deposits and borrowings, labour (employee expenses) and fixed assets are used as inputs
to produce outputs such as loans and investments and other incomes. The prices of these inputs are
respectively cost of deposits, measured by average interest paid per rupee of deposits, average
staff cost per employee and cost per unit fixed assets as measured by non-labour operational cost
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per rupee amount of fixed assets. The non-labor operational costs include rent taxes and lighting
and insurance. The relevant outputs are interest related revenues and other income mostly from
commission, exchange, brokerage etc. The prices of these outputs are average interest earned per
rupee of loan and advances. For non interest income has fairly standardized pricing mechanism.
Therefore it is assumed that the price of non interest income is unity throughout the years for all
banks(Das et al 2009). Data related to SCBs are collected from the Statistical Tables Relating to
Banks in India, spanning a period from 2004 to 2012. This publication of RBI publishes data of
audited balance sheets and profit and loss accounts of all Scheduled Commercial Banks.
The study has taken a period from 2004 to 2012. The reason behind the time span is to get a large
no of SCBs which had been listed before this period. Basically after 2000 most of the PSBs got
themselves listed as the Government cleared the deck for those to tap capital market for
maintaining capital adequacy ratio. So we collected data of 27 banks listed on NSE out of total 42
listed banks [Appendix1]. For these 27 listed banks we got data for 9 years share prices. The share
prices are calculated by taking the average of adjusted opening and adjusted closing for the year.
For the market return the adjusted yearly value of Nifty has been considered. These data were
retrieved from prowess data base of CMIE. The proxy for risk free return was yield of 10 year
government bond yield. This had been obtained from Annual Report of RBI from 2004 to 2012.
All the data had been collected as per the financial year starting from 1 st of April to 31st March. We
have chosen the period from 2005 to 2012 as the economic slowdown started from 2007 onwards
and continued for a long time. The study examined in a difficult time how these listed banks
became cost efficient to have an impact on the investors. Also all data are available in the above
said period.

Figure 1
Inputs:

1)
2)
3)

DMUs:

Deposits and
Borrowings
Employees
Fixed Assets

Banks
produces
outputs

Outputs:

1)
2)

Interest income
Other income

The objective of the study to evaluate efficiency of all listed banks on NSE and regress the result of
efficiency on share prices. This is to verify how the previous year efficiency influences the investor
behavior for the banking companies stocks. This present study bears importance in the sense that,
the competitive pressures have progressively driven banks to strategically focus on churning a
better return to shareholders. Also banks have travelled from a relatively conservative regime to a
post liberalized era and subsequently have been permitted to tap capital market for rising of capital.
Even the government owned banks started barging to capital market in the early 2000. The focus
shifted to manage hidden challenges in a dynamic business environment.

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Mishra et al. (2014). Asian Journal of Research in Business Economics and Management,
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The objectives of the study are:


1) To measure cost efficiency in the Indian banking companies, only listed in the NSE from 2005
to 2012.
2) To establish a relationship between cost efficiency and share prices of listed banks.

V.

Analysis and Findings

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Table-1. Cost Efficiency Scores


SBI
Allahbad Bnk
Andhra Bnk
BOI
Corporation Bnk
Dena Bnk
IDBI Bnk
IOB
OBC
Syndicate Bnk
Vijay Bank
AxisBank/UTI
CityUnion Bnk
Federal Bnk
ING Vyasya Bnk
J&K Bnk
Karur Vyasya Bnk
Laxmivilas Bnk
SouthIndian Bnk
HDFC Bnk
ICICI Bnk
Indusind Bnk
Bank of Baroda
Canara bnk
Karnataka bnk
Punjab Natl Bank
Union Bnk of Ind
Avg

2004
1.000
0.697
0.916
0.872
0.920
0.982
0.392
0.694
1.000
0.643
0.812
0.896
1.000
0.856
0.987
0.773
1.000
1.000
0.986
0.948
1.000
0.940
0.700
0.857
0.938
0.743
0.821
0.866

2005
1.000
0.549
0.851
0.522
0.743
0.572
1.000
0.495
0.464
0.436
0.545
0.547
1.000
0.601
0.520
0.412
0.861
0.904
0.672
0.626
1.000
0.850
0.508
0.569
0.847
0.495
0.467
0.669

2006
1.000
0.676
0.782
0.764
0.858
0.823
1.000
0.747
0.836
0.710
0.716
0.886
1.000
0.782
0.817
0.784
0.945
0.952
0.834
0.900
1.000
0.814
0.677
0.855
0.771
0.662
0.802
0.829

2007
1.000
0.873
0.938
0.880
0.939
0.800
1.000
0.866
0.991
0.838
0.906
0.835
1.000
0.909
0.919
0.916
1.000
1.000
0.896
0.929
1.000
0.862
0.854
0.856
0.917
0.829
0.930
0.914

2008
1.000
0.898
0.980
0.969
1.000
0.893
1.000
0.941
1.000
0.900
0.876
1.000
1.000
0.986
0.973
0.891
1.000
1.000
0.945
1.000
1.000
0.899
0.910
0.916
0.892
0.895
0.908
0.951

2009
1.000
0.790
0.963
0.902
0.903
0.861
0.943
0.859
0.910
0.893
0.832
0.877
0.999
0.895
0.833
0.821
0.946
1.000
0.872
0.799
1.000
0.877
0.915
0.885
0.819
0.875
0.857
0.894

2010
1.000
0.909
1.000
0.959
0.978
0.938
1.000
0.870
0.988
0.986
0.920
1.000
1.000
1.000
0.908
0.863
0.988
1.000
0.970
0.915
1.000
0.940
1.000
0.983
0.869
0.968
0.949
0.959

2011
1.000
0.140
0.956
0.930
0.952
0.796
1.000
0.880
0.886
0.938
0.765
1.000
1.000
1.000
0.952
0.617
0.806
1.000
0.743
0.944
1.000
0.925
1.000
0.946
0.712
0.952
0.925
0.880

2012
1.000
0.890
1.000
0.981
0.971
0.953
0.997
0.936
0.939
0.965
0.881
1.000
1.000
0.958
0.926
0.757
0.958
1.000
0.996
0.967
1.000
1.000
1.000
0.930
0.857
0.887
0.994
0.953

Avg
1.000
0.714
0.932
0.864
0.918
0.846
0.926
0.810
0.890
0.812
0.806
0.893
1.000
0.887
0.871
0.759
0.945
0.984
0.880
0.892
1.000
0.901
0.840
0.866
0.847
0.812
0.850

Cost efficiency scores of 27 listed banks on NSE have been found out. The result is given in the
Table 1A. The cost efficiency is calculated on the variable return to scale. Result shows that only
three banks State bank of India, ICICI Bank and City Union Bank is cost efficient units in this
group. Even the average shows that during the financial meltdown and with continuous asset
impairment, from 2007 to 2010 banks have shown resilience. Model (5) has been simply estimated
by applying ordinary least squares (OLS) to pooled data. The estimation results are reported below.

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Vol. 4, No. 8, pp. 82-94

The R2 is 0.447 meaning that 48 percent of the variation in the dependent variable can be explained
by the variation of independent variables. The D W statistic is 2.033. This also indicates the
absence of multicolinearity among the independent variables. t statistic of excess market return
(emr) is significant, but the cost efficiency coefficient though positive but not significant. The
constant is negative but not significant. F statistic (significant) indicates that all the independent
variables are combined having an impact on dependent variable.
esrit = - 0.822+ 0.990 ceit-1 + 1.311 emrit

Table -2 Coefficients
Mod
el

Unstandardiz
ed
Coefficients

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Std.
Error

Standardiz
ed
Coefficient
s
Beta

1 (Constant)

-.822

.203

emr

1.311

.100

.706

ce

.990

.227

.235

4.049
13.12
5
4.362

Sig
.

.00
0
.00
0
.00
0

Correlations

Collinearity
Statistics

Zero
orde
r

Parti
al

Par
t

Toleran
ce

VIF

.631

.669

.897

.008

.286

.66
9
.22
2

1.11
5
1.11
5

.897

a Dependent Variable: esr


It is noticed that excess market returns do have significant explanatory power on banks excess
return variation. The value of 1.311 mean s banks stock is more sensitive to market movements.
The coefficients of cost efficiency are positive and significant. That is if cost efficiency goes up
then the return from the stock will go up as the demand for the share in the market goes up.

VI.

Conclusion

In this study cost efficiency of banks whose stocks are traded on NSE were measured by using
DEA for the 2004 to 2012 period. Even in the time of financial meltdown banks showed themselves
cost efficient units. Cost efficiency scores were used as explanatory variables in CAPM Model to
test whether there is an explanatory power of cost efficiency on stock price returns. Cost efficiency
is reflected on the share return in the subsequent period. That means efficiencies of last year are
having implications on the subsequent years. Portfolio consists of banks whose stocks are traded in
the NSE is semi strong form efficient indicating that publicly known information is embedded in
the stock prices. So a cost efficient unit is surely to be looked upon by the investor while making
an investment in these stocks.

91

Mishra et al. (2014). Asian Journal of Research in Business Economics and Management,
Vol. 4, No. 8, pp. 82-94

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93

Mishra et al. (2014). Asian Journal of Research in Business Economics and Management,
Vol. 4, No. 8, pp. 82-94

Appendix

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Table 1 : Banks listed on NSE as on 31st March 2012


Code
ALBK
ANDHRABANK
AXISBANK
BANKINDIA
CANBK
CENTRALBK
CORPBANK
CUB
DENABANK
DCB
DHANBANK
FEDERALBNK
HDFCBANK
ICICIBANK
IDBI
INDIANB
INDUSINDBK
INGVYSYABK
IOB
J&KBANK
KARURVYSYA
KOTAKBANK
KTKBANK
LAKSHVILAS
MAHABANK
MYSOREBANK
ORIENTBANK
PNB
PSB
SBBJ
SBIN
SBT
SOUTHBANK
SYNDIBANK
UCOBANK
UNIONBANK
UNITEDBNK
VIJAYABANK
YESBANK

Name
Allahabad Bank
Andhra Bank
Axis Bank Limited
Bank of India
Canara Bank
Central Bank of India
Corporation Bank
City Union Bank Limited
Dena Bank
Development Credit Bank Limited
Dhanlaxmi Bank Limited
The Federal Bank Limited
HDFC Bank Limited
ICICI Bank Limited
IDBI Bank Limited
Indian Bank
IndusInd Bank Limited
ING Vysya Bank Limited
Indian Overseas Bank
The Jammu & Kashmir Bank Limited
Karur Vysya Bank Limited
Kotak Mahindra Bank Limited
The Karnataka Bank Limited
Lakshmi Vilas Bank Limited
Bank of Maharashtra
State Bank of Mysore
Oriental Bank of Commerce
Punjab National Bank
Punjab & Sind Bank
State Bank of Bikaner and Jaipur
State Bank of India
State Bank of Travancore
The South Indian Bank Limited
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
Yes Bank Limited

94

Instrument
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ
EQ

Listing date
29-Nov-02
4-Apr-01
16-Nov-98
30-Apr-97
23-Dec-02
21-Aug-07
1-Dec-97
25-Aug-98
15-Jan-97
27-Oct-06
1-Apr-04
8-Feb-95
8-Nov-95
17-Sep-97
20-Sep-95
1-Mar-07
28-Jan-98
1-May-96
7-Dec-00
22-Jul-98
26-Jul-00
20-Dec-95
10-May-00
21-Jun-00
12-Apr-04
28-Jul-09
2-Jul-97
24-Apr-02
30-Dec-10
24-Jan-98
1-Mar-95
20-Feb-98
8-Dec-98
22-Dec-99
9-Oct-03
24-Sep-02
18-Mar-10
10-Jan-01
12-Jul-05