Abstract:
Previous research findings indicate that the relevant performance of firms is one way or
another, reflected in the market prices of shares. Such research is focussed on different
performance components of firm individual risk (FIR), but none of the research segregates
systematic and unsystematic risk of the shares to levels where the relative FIR components
that were researched could be quantified in proportion to FIR level share price determinants.
This brings about the objective of this research to segregate the pricing of shares in terms of
market and firm specific factors with the intention to quantify the association of relative bank
efficiency and earnings performance with the pricing of South African bank shares. The study
draws a parallel between the actual significance of measured efficiency and earnings per
share (EPS) with share pricing and quantified FIR. Within this context the comparative
significance of measured efficiency and EPS are explored to investigate the Efficient Market
Hypothesis (EMH) prevalence. An analysis of efficiency and share price relationships at
different financial year time points shows a semi-strong form of the EMH in both the pre-
Global Financial Crises (GFC) and GFC periods. This indicates that the application of an
active investment strategy by investors based on efficiency measures may be beneficial. The
impact of EPS as contributing determinant of share prices increased during the GFC period
compared to the pre-GFC period, but reflects a strong form of the EMH.
