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A new decomposition and interpretation of Hicks-Moorsteen productivity index for analysis of Stock Exchange companies: Case study on pharmaceutical industry

Isaac Mohammadian and Mustafa Jahangoshai Rezaee

Socio-Economic Planning Sciences, 2020, vol. 69, issue C

Abstract: This paper deals with the productivity index based on Hicks-Moorsteen (HM) productivity index for analysis of Stock Exchange firms. In this paper, a decomposition of Hicks-Moorsteen productivity index is provided that uses data envelopment analysis (DEA) models. On the other hand, it is offered a new interpretation and decomposition for components of HM productivity index that in previous studies were not performed any interpretation of it. These components have named the output production and the input consumption in terms of changing the efficiency frontier. In addition, by comparing the components of HM productivity index and productivity value, the optimal values of output production and input consumption are determined. Also, the analysis is determined how to identify the optimal value of a firm over a period of time. The proposed approach is applied to 26 pharmaceutical manufacturers that are from Tehran Stock Exchange. Data have been collected for six consecutive years (2009–2014) and have been considered financial ratios for evaluating companies. The results show that the Hicks-Moorsteen productivity index is more able to provide managerial aspects than other productivity indexes such as the Malmquist productivity index.

Keywords: Hicks-Moorsteen productivity index; Data envelopment analysis; Productivity index decomposition; Stock Exchange; Financial ratios; Pharmaceutical manufacturers (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.seps.2018.12.001

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