NBER

Gerard Caprio, Luc Laeven, Ross Levine

Bibliographic Information

NBER Working Paper No. 10158
Issued in December 2003
NBER Program(s):CF, IFM

Published: Caprio, Gerard & Laeven, Luc & Levine, Ross, 2007. "Governance and bank valuation," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 584-617, October. citation courtesy of

Available Formats

Abstract

Which public policies and ownership structures enhance the governance of banks? This paper constructs a new database on the ownership of banks internationally and then assesses the ramifications of ownership, shareholder protection laws, and supervisory/regulatory policies on bank valuations. Except in a few countries with very strong shareholder protection laws, banks are not widely held, but rather families or the State tend to control banks. We find that (i) larger cash flow rights by the controlling owner boosts valuations, (ii) stronger shareholder protection laws increase valuations, and (iii) greater cash flow rights mitigate the adverse effects of weak shareholder protection laws on bank valuations. These results are consistent with the views that expropriation of minority shareholders is important internationally, that laws can restrain this expropriation, and concentrated cash flow rights represent an important mechanism for governing banks. Finally, the evidence does not support the view that empowering official supervisory and regulatory agencies will increase the market valuation of banks.

National Bureau of Economic Research
1050 Massachusetts Ave.
Cambridge, MA 02138
617-868-3900
info@nber.org

Twitter RSS

View Full Site: One timeAlways