College of Economic and Management Sciences (UNISA)
Abstract
The purpose of the study is to determine the degree to which banks’market performance, as measured by market value ratios, is aff ectedby their internal performance. Annual fi nancial statement reportswere used to determine the internal and market performance oflisted banks on the JSE Limited over a ten-year period. The internalperformance measures used are the profi tability ratios in the DuPont analysis and two Data Envelopment Analysis (DEA) models toestimate effi ciency. Income statement data were included as theoutput of the fi rst model to determine banks’ operating effi ciency,and balance sheet data were included as the output of the secondmodel to determine banks’ fi nance and investment effi ciency. Thestudy concluded that market value ratios correlate better withprofi tability ratios than the income statement output-based andbalance sheet output-based effi ciencies. This study is the fi rst tocompare two DEA models and profi tability ratios with market valueratios. The value of the study is therefore that it indicates thatprofi tability ratios should be used as a proxy for market value ratiosrather than effi ciency measures that focus separately on incomestatement data and balance sheet data
