- Measuring Exposure to Dependence Risk with Random Bernstein Copula , scenarios
- The Valuation Role of Technical Efficiency : Empirical Investigation of the US airlines
Keywords: Technical efficiency, Productivity, Earnings Surprise, Value relevance, US airline industry, Linear Information Model, Persistency
Abstract: The purpose of this article is to investigate the value relevance of technical efficiency, based on the publicly available reports of the US Department of Transportation, within the Linear Information Model (LIM) of Ohlson (1995). Referring to data envelopment analysis (DEA) and stochastic frontier analysis (SFA) we evaluate technical efficiency, which quantifies the productive competitive advantage of the firm. We investigate the value relevance of technical efficiency in tandem with information about technical characteristics of the US carriers’ operations and the accounting variables of the LIM. We provide evidence of a statistical relation between current technical efficiency and stock prices and returns. While the variables of the LIM explain the most part of stock returns, technical efficiency exhibits the highest incremental value relevance. Furthermore, the implementation of an accounting based proxy does not reach the value relevance of technical efficiency. The originality of this article lies in the investigation of theinformation dynamic of technical efficiency. Results indicate that the greatest value relevance of technical efficiency is associated with its greatest persistency relative to accounting numbers. We conclude that technical efficiency is an appropriate complement to accounting information for analysts and professional investors to perform estimates about the future value of the firm, especially when accounting is deteriorated by sector wide shocks.