bank value
204497574
Capital and Liquidity Regulations, Resilience, and Bank Value
In the business arena, particularly in the field of corporate finance, the scope of valuation is highly significant. There are several value drivers for a firm. However, due to its nature of business, a bank's valuation is affected by several unique drivers including earnings diversification, risk capabilities, assets mix, and a lot of intangible factors. Since banking is a highly regulated sector, this chapter is designed to address the missing links between Basel capital and liquidity regulations, banking system resilience, and bank valuation.
Md Atiqur Rahman Khan
19304039
The Cross Section of Bank Value
We study the determinants of value creation within U.S. commercial banks. We focus on three theoretically motivated drivers of bank value: screening and monitoring, "safe" deposit production, and synergies between deposit taking and lending. To assess the relative contributions of each, we develop novel measures of banks' deposit productivity and asset productivity and use these measures to evaluate the cross section of bank value. We find that variation in deposit productivity explains the majority of variation in bank value, consistent with theories emphasizing safe asset production. We also find evidence of meaningful value creation from synergies between deposit taking and lending. Overall, our findings suggest that banks are primarily "special" due to their unique liability structure rather than their ability to screen and monitor borrowers.
Mark Egan Stefan Lewellen Adi Sunderam
169192615
How Do Banks Interact with Fintechs? Forms of Alliances and their Impact on Bank Value
The increasing pervasiveness of technology driven firms that offer banking services has led to a growing pressure on traditional banks to modernize their core business activities. Banks attempt to confront the challenges of digitalization by cooperating with financial technology firms (fintechs) in various forms. In this paper, we investigate the factors that drive banks to form alliances with fintechs. Furthermore, we analyze whether such bank fintech alliances affect the market valuation of banks. We provide descriptive evidence on the different forms of alliances occurring in practice. Using hand collected data covering the largest banks from Canada, France, Germany, and the United Kingdom, we show that banks are significantly more likely to form alliances with fintechs when they pursue a well defined digital strategy and/or employ a Chief Digital Officer. We evidence that markets react more strongly if digital banks rather than traditional banks announce a bank fintech alliance. Finally, we find that alliances are most often characterized by a product related collaboration between the bank and the fintech and that banks most often cooperate with fintechs providing payment services.
Lars Hornuf Milan Frederik Klus Todor Stefan Lohwasser Armin Schwienbacher
168722337
Empirical essays on risk disclosures, multi level governance, credit ratings, and bank value evidence from MENA banks
This thesis contains four essays that examine the relationships among risk disclosures, multi level governance, credit ratings, and bank value in the Middle East and North Africa (MENA) banks. These essays concentrate on four closely linked risk disclosures, and governance topics that quantitatively investigate the antecedents and informativeness of risk disclosures by banks from 14 countries in MENA region over the 2006 2013 inclusive period. The first essay aims at investigating the impact of multi layer governance mechanisms on the level of risk disclosures by banks. The essay result suggests a variation between MENA banks in the level of risk disclosures with a significant improvement from 2006 to 2013. Specifically, the findings are three fold. First, the results suggest that Sharia Supervisory Board (SSB) is positively associated with the level of risk disclosures by banks. Second and at the bank level, the essay finds that ownership (governmental ownership and family ownership) and board (board size and non executive directors) structures have a positive effect on the level of risk disclosures by banks, whilst CEO duality is negative, but insignificantly related to bank risk disclosures. At the country level, the evidence suggests that control of corruption has a positive effect on the level of bank risk disclosures, whilst political stability and absence of violence have a negative, but insignificant association with the level of bank risk disclosures. In the second essay, the thesis investigates the relationships among national governance quality (NGQM) Islamic governance quality (ISGQ) including other bank level governance mechanisms, and risk management and disclosure practices (RMDPs) and consequently ascertains whether NGQM has a moderating influence on the ISGQ RMDPs nexus. The findings are four fold. Firstly, this study finds that RMDPs are higher in banks from countries with higher NGQM. Secondly, this essay shows that RMDPs are higher in banks with better Islamic governance. Thirdly, the study finds that board size and non executive directors have a positive effect on the level of RMDPs. Finally, this study finds evidence that suggests that NGQM has a moderating effect on the Islamic governance quality RMDPs nexus. The third essay explores whether RMDPs have a predictive effect (informativeness) on banks' credit ratings (BCRs) and consequently ascertains whether governance structures can moderate such an association. The findings suggest that RMDPs have a predictive effect on BCRs. The study finds that the quality of the BCR is higher in banks that have higher risk disclosures, board size, government ownership, board independence, women directors and established SSB. On the other hand, the results indicate that the BCR quality is lower in banks that have higher foreign ownership, and CEO role duality. Furthermore, the findings suggest that governance structures moderate the relation between RMDPs and BCRs. The final essay examines the extent to which RMDPs and multi level governance can explain observable changes in bank value in a number of ways. First, this essay seeks to examine whether RMDPs can influence the value of banks. The second objective is to examine how NGQM may affect the bank value. Finally, this essay explores the relationship between operating in better or poorly governed countries and the market value of banks. The results confirm the substantial role of risk disclosures and multi level governance in improving bank valuation in MENA. More specifically, the results indicate that market valuation is higher in banks with bigger foreign ownership, board size, board independence, Islamic governance, and NGQM. The results also show a significant negative relationship between CEO power and bank value. The research's empirical findings are largely in line with the predictions of the multi theoretical framework that incorporates insights from agency, signalling, legitimacy, institutional, and resource dependence theories. The study findings are robust to alternative firm and country level controls, alternative multi level governance mechanisms, risk disclosure proxies, alternative estimation techniques, and endogeneity problems. In doing so, this study extends, as well as contributes to the banking and governance literature in a number of ways. First, to the best of the researcher's knowledge, this thesis provides a first time cross country evidence on the level of risk disclosures in MENA countries, especially following the 2007/08 financial crisis in the banking industry. Second, this thesis offers first time evidence on the informativeness of Islamic governance quality and risk disclosures from equity and debt markets. Third, this thesis offers evidence and extends prior research on the influence of multi level governance on bank value, and credit ratings, using a multi theoretical framework. Fourth, the study offers first time evidence on the effect of national governance quality on banks' risk disclosures, credit ratings, and bank value.
Ahmed A Elamer
169479653
THE BANK VALUE ESTIMATION PROBLEM
This article reports to the main issues in evaluating bank costs and identifying factors have influence on. The necessity of bank evaluating may occur at various times, such during its merger or purchase, but also during reorganization or insolence sanitation of a financial institution. In such a case, the correct assessment of the bank value could lead to positive synergy effects; assessment errors might have disastrous social effects through its depositors _debt undervaluing. The article contains analysis of the main models of bank costs, correlated with the needs of this evaluation, and also their reporting during the evaluation of Moldova's bank costs in the process of selling its shares.
Victoria Cociug Victoria Postolache
73564057
Does bank capital regulation affect bank value
The aim of this study was to examine the relationship between capital adequacy and the bank profitability measured by returns on equity (ROE) for Tanzanian large commercial banks during the period between 2009 and 2014. The positive relationship between bank capital and performance may also be explained using monitoring based theory. The monitoring based theory suggests that higher bank capitals encourage serious scrutiny and monitoring of borrowers to avoid default risk. The monitoring of borrowers indirectly improves the probability of bank's survival by eventually increasing surplus generated through the healthier relationship between borrowers and banks, hence, bank performance Furthermore, the study found a significantly positive relationship between bank size and bank returns on equity. This is consistent with a familiar explanation that larger banks accumulate large assets which generate relatively more income and eventually increases the bank's profitability. The study also reveals a negative and significant relationship between non performing loans and bank profitability. This relationship shows that accumulation of Non Performing Loans invites vulnerability to default risk which consequently causes banks' failure to sustain or increase their investment efficiency. Similarly, lower NPLs are associated with drop in deposits rate which eventually impacts on banks' operations and profitability. Consequently, the study recommends the banks' capital regulation to be anchored on a sound system of bank monitoring and the Bank of Tanzania should swiftly and strictly enforce the compliance of the bank capital requirements and review the minimum capital requirement of deposit money regularly so as to maintain the optimal capital level in an attempt to improving bank profits level. The study also encourages bank capitalization to improve performance. More specifically, banks are encouraged to have a habit of retaining more earnings instead of distributing such large sums as bonuses in order to increase the banks' capital base. Key words: Capital regulation, performance, returns on equity.
Lotto Josephat
56454539
Insider ownership, power, and bank value
This paper examines the influence of insider ownership and power on bank value. We measure insider ownership as the fraction of the bankaEUR(tm)s common stock owned by its directors and officers as a group, and insider power using the Milnor and Shapley (1978) power index for oceanic voting games. Using a sample of U.S. banks, we find that insider ownership is positively related to bank value, while insider power is negatively related to bank value. These results are consistent with the agency theory literature. To the extent that regulators want to increase bank value, they should encourage equity ownership by bank insiders and outside blockholders.
Jijun Niu
225878202
Do ESG scores effect bank risk taking and value? Evidence from European banks
We examine whether environmental, social and governance (ESG) scores of European banks impact on their risk taking behavior and on bank value. We find that high ESG scores are associated with a modest reduction in risk taking for banks that are high or low risk takers, and that the impact is conditional on executive board characteristics. These findings are consistent with the "stakeholder" view of ESG activities. However, high ESG scores are also associated with a reduction in bank value consistent with the "overinvestment" view of ESG whereby scare resources are diverted from investment. The decline in bank value occurs notwithstanding a positive indirect link between ESG scores and bank value through their impact on risk taking. Our results are robust to different measures of risk and value and to alternative estimation methodologies, and the key results hold for each of the sub components of the ESG score. We conclude that there is a trade off between reducing bank risk taking and a more stable financial system on the one hand and bank value on the other.
Caterina Di Tommaso John Thornton
202319445
The Effect of Consumers' Perceived Value on Acceptance of an Internet Only Bank Service
This study focuses on perceived value, which is not mentioned in previous internet only bank studies, to analyze the popularity of internet only banks. It does this by exploring the relationships between the perceived value and usage intention of customers. The purpose of this study is to help us understand customers' decision making to accept innovative services by finding factors that affect consumer acceptance of internet only banks. Using multiple regression, this study analyzes data gathered from college students in their 20s who are familiar with IT services and are interested in internet only banks. The results show that all three components of perceived value (economical value, convenience value, and emotional value) increase usage intention. Convenience value is the most important factor in the acceptance of internet only banking services. The findings indicate that perceived value is an attractive factor in using internet only banks and suggest that managing and developing perceived value is an important marketing strategy.
Sustainability
Sang Joon Ahn Seong Ho Lee
204445173
Determinants of bank shareholder value: evidence from GCC countries
Purpose The purpose of this paper is to examine the effect of bank specific, financial structure and macroeconomic factors on the shareholder value of banks in GCC economies during 2000 2017. Design/methodology/approach To estimate the model and analyze the data collected from the BankScope and World Bank World Development Indicator database, the author uses static panel estimation techniques as well as two step difference and system dynamic generalized method of moments estimator. Findings The results show that banks that are highly dependent on non traditional activities have higher shareholder value. Higher opportunity cost, capitalization and demand deposits result in a better bank shareholder value. Furthermore, banks with higher loan exposure and growth have better shareholder value. Non performing loans and market risk have insignificant effects on bank shareholder value. However, GCC banks suffer from diseconomies of scale and scope. The author also finds that banks located in countries with high inflation rates, high rates of interest or in financially developed economies offer better shareholder value. High credit to the private sector reduces the bank shareholder value. The paper also provides evidence that the impact of financial turmoil on the shareholder value of the GCC banking sector is negative and significant and has severely weakened the GCC banking system. Practical implications The results of this study necessitate formulation of various policy measures that can counter the effects of shareholder value of banks. Originality/value The present study is among the first to address the influence of financial turmoil on bank shareholder value. It also studies new variables, such as demand deposits, non performing loans, loan growth, non interest revenue and off balance sheet activities, which have not been examined in relation to bank shareholder value. It also applies both static techniques and dynamic panel estimation techniques to analyze the data. The analysis is carried out at the aggregate level as well as at the national level and also provides several robustness analyses using various model specifications.
International Journal of Managerial Finance
Abdulazeez Y H Saif-Alyousfi