 A comprehensive analysis of the decline in the market-to-book ratio of European banksS. Markoulis, S. Martzoukos, S. Savvas and V. Zagkreos International Review of Economics & Finance, 2025, vol. 100, issue C Abstract: We analyse a sample of 215 European banks and find that their market-to-book ratio has declined substantially since the GFC. To assess what may account for this, bank-specific and country-specific indicators are used, as well as, for the first time for European banks, ESG variables. We find bank fundamentals, such as ROE and volatility of stock returns to be important determinants of the market-to-book ratio. We also find the valuation of large banks to be penalized more, relative to that of smaller ones. On the country-specific front, we find GDP growth to be significant, as well as the relative size of the banking sector. As far as ESG is concerned, we find different ESG sub-pillars to affect bank valuation differently, more specifically, we find a positive relationship between duality and valuation, particularly for large banks, and a negative one for environmental engagement, the latter being suggestive of the ‘over-investment’ hypothesis. Keywords: Market-to-book ratio; Franchise value; Bank fundamentals; Shapley-owen decomposition; ESG (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:100:y:2025:i:c:s1059056025002709 DOI: 10.1016/j.iref.2025.104107 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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