Super-efficiency and Stock Market Valuation: Evidence from Listed Banks in China (2006 to 2023)

ArXiv ID: 2407.14734 “View on arXiv”

Authors: Unknown

Abstract

This study investigates the relationship between bank efficiency and stock market valuation using an unbalanced panel dataset of 42 listed banks in China from 2006 to 2023. We employ a non-radial and non-oriented slack based super-efficiency Data Envelopment Analysis (Super-SBM-UND-VRS based DEA) model, which treats Non-Performing Loans (NPLs) as an undesired output. Our results show that the relationship between super-efficiency and stock market valuation is stronger than that between Return on Asset (ROA) and stock market performance, as measured by Tobin’s Q. Notably, the Super-SBM-UND-VRS model yields novel results compared to other efficiency methods, such as the Stochastic Frontier Analysis (SFA) approach and traditional DEA models. Furthermore, our results suggest that bank evaluations benefit from decreased ownership concentration, whereas interest rate liberalization has the opposite effect.

Keywords: Data Envelopment Analysis (DEA), Super-SBM-UND-VRS, Bank Efficiency, Non-Performing Loans (NPLs), Tobin’s Q, Equity (Banking Sector)

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 8.0/10
• Quadrant: Holy Grail
• Why: The paper employs advanced non-parametric econometric models (Super-SBM-UND-VRS DEA) and requires complex linear programming solutions for efficiency scoring, increasing math density. It uses a specific, long-term dataset (2006-2023) of 42 Chinese banks and performs comparative analysis with Stochastic Frontier Analysis (SFA) and Tobin’s Q regressions, demonstrating strong data processing and methodological rigor.

  flowchart TD
    A["Research Goal:<br>Relationship between Bank Efficiency<br>and Stock Market Valuation"] --> B["Data & Inputs<br>42 Listed Chinese Banks<br>2006-2023<br>Unbalanced Panel Dataset"]
    
    B --> C{"Methodology"}
    C --> D["Super-SBM-UND-VRS DEA<br>(Non-radial Super-efficiency<br>with Undesired Outputs/NPLs)"]
    C --> E["Comparison Models<br>SFA & Traditional DEA"]
    C --> F["Performance Metric<br>Tobin's Q & ROA"]
    
    D --> G["Computational Process<br>Estimate Bank Super-efficiency"]
    E --> H["Comparative Analysis"]
    F --> H
    
    G --> I["Key Findings & Outcomes"]
    H --> I
    
    I --> J["Super-efficiency > ROA<br>in explaining Tobin's Q"]
    I --> K["Super-SBM-UND-VRS yields<br>novel results vs. SFA/DEA"]
    I --> L["Bank evaluation benefits<br>from decreased ownership<br>concentration"]
    I --> M["Interest rate liberalization<br>has opposite effect"]