A dynamic SBM-DEA and portfolio formation test approach to the operating efficiency-stock returns nexus

This study assesses operating efficiency and its drivers in China's inefficient publicly traded real estate companies via dynamic slack-based measure data envelopment analysis and panel regression techniques. This paper also investigates operating efficiency as a company characteristic impacting stock returns using a portfolio formation test. The results indicate that only 27 out of 106 listed real estate companies are operationally efficient. Return on assets, capital structure, higher education, and institutional ownership positively and significantly impact operating efficiency. The reward of an increase in operating efficiency is seen in its positive influence on stock returns. Listed real estate companies should improve the efficiency of their operational activities to generate higher stock returns.

Automated summary

This study assesses the operating efficiency and its drivers in China's publicly traded real estate companies and finds that only a small number of companies are operationally efficient. The study also highlights the positive impact of factors such as return on assets, capital structure, higher education, and institutional ownership on operating efficiency. The findings suggest that improving operational efficiency can lead to higher stock returns.