Response to “Discussion of ‘How Sensitive Are Bank Market Values to Regulatory Adjustments of Capital?’â€

Martien Lubberink and Roger Willett ()
Additional contact information
Martien Lubberink: School of Accounting and Commercial Law, Victoria University of Wellington, P. O. Box 600, Wellington 6140, New Zealand
Roger Willett: School of Accounting and Commercial Law, Victoria University of Wellington, P. O. Box 600, Wellington 6140, New Zealand

The International Journal of Accounting (TIJA), 2024, vol. 59, issue 04, 1-7

Abstract: We provide a detailed response to Ines Simac's (2024) discussion of our study on the sensitivity of bank market values to regulatory adjustments (RAs) of capital. Initially, we investigated the relevance of these adjustments, motivated by ongoing changes in the definition of bank capital aimed at ensuring financial stability. Our research utilized log-log models to address the challenges of alternative methodologies that may not effectively capture the value relevance of bank capital and RAs. Our results underscore the stability and predictability of coefficients that measure value relevance.We further explore the valuation perspective, distinguishing between a “valuation†model for a theory of the relation between market and accounting values and a statistical model that estimates the sensitivity of market values to changes in accounting variables. We advocate for the use of log-log models due to their robustness in estimating response coefficients as elasticities. This approach minimizes issues related to scale and distribution assumptions inherent in additive-linear models.We also address minor points raised in the discussion, including the coefficient values of goodwill and Tier 2 capital. Our findings contribute to a nuanced understanding of how regulatory adjustments influence bank valuations, offering implications for both academic research and regulatory policy.

Keywords: Banking; capital structure; log-log regression models; prudential filters; value relevance (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S1094406024800039
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:tijaxx:v:59:y:2024:i:04:n:s1094406024800039

Ordering information: This journal article can be ordered from

DOI: 10.1142/S1094406024800039

Access Statistics for this article

The International Journal of Accounting (TIJA) is currently edited by A. Rashad Abdel-khalik

More articles in The International Journal of Accounting (TIJA) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().