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

**Authors:** Yun Liao  
**arXiv:** [2407.14734](https://arxiv.org/abs/2407.14734)  
**Date:** 2024-07-20  
**Summary page:** https://www.summarizepaper.com/en/paper/2407.14734v1/

## Key points

- Study by Yun Liao explores relationship between bank efficiency and stock market valuation in China
- Utilizes unique Super-SBM-UND-VRS based DEA model focusing on NPLs as undesired output
- Super-efficiency shows stronger correlation with stock market valuation than ROA (Tobin's Q)
- Super-SBM-UND-VRS model offers new insights compared to SFA and traditional DEA models
- Results suggest bank evaluations benefit from reduced ownership concentration, while interest rate liberalization has a negative impact
- Analysis sheds light on dynamics between bank efficiency and stock market valuation in China over nearly two decades

## Summary

This study by Yun Liao explores the relationship between bank efficiency and stock market valuation in China using an unbalanced panel dataset of 42 listed banks from 2006 to 2023. The research utilizes a unique non-radial and non-oriented slack based super-efficiency Data Envelopment Analysis (Super-SBM-UND-VRS based DEA) model, with a focus on treating Non-Performing Loans (NPLs) as an undesired output. The findings reveal that super-efficiency has a stronger correlation with stock market valuation than Return on Asset (ROA), as measured by Tobin's Q. Notably, the Super-SBM-UND-VRS model offers new insights compared to other efficiency methodologies like Stochastic Frontier Analysis (SFA) and traditional DEA models. Furthermore, the results suggest that bank evaluations benefit from reduced ownership concentration while interest rate liberalization has a negative impact. This comprehensive analysis sheds light on the complex dynamics between bank efficiency and stock market valuation in China's banking sector over nearly two decades. By examining specific operational inefficiencies such as NPLs and considering broader economic factors like interest rate policies, this study provides valuable implications for stakeholders looking to improve bank performance and maximize stock market value in China's financial landscape.