The Effect of Efficiency on Firm’s Value: Evidence from PrivateCommercial Banks of Bangladesh

Abstract

Efficiency of any firm plays an inevitable role to the firm’s success. The purpose of this study is
to exhibit the impact of efficiency on the value of the Bangladeshi firms. For this study 13 private
commercial banks of Bangladesh for the year 2015-2019 have been taken as sample firms. This
study is empirical in nature and convenient sampling technique has been used. Financial ratios
have been calculated to measure the efficiency of the banks and efficiency ratio along with
associated five ratios i.e., return deference of interest-bearing assets, return on equity, return on
assets, net interest margin and loan to deposit ratio have been taken into consideration for this
study. Regression analysis has been conducted with a view to demonstrating whether there is any
relationship between the efficiency of the firm and the value of the firm. It has been found that
efficiency ratio, return deference of interest-bearing assets, return on assets and net interest margin
have significant impact on the firm’s value. On the other hand, return on equity and loan to deposit
ratio have not been found to have significant impact on the value of the firm.