Did the Financial Crisis affect the Market Valuation of Large Systemic U.S. Banks?

Georgios Bertsatos and Plutarchos Sakellaris

No 201709, Working Papers from Athens University Of Economics and Business, Department of Economics

Abstract: We examine the impact of the financial crisis on the stock market valuation of large and systemic U.S. bank holding companies (BHCs).Using the Bertsatos and Sakellaris (2016) model of fundamental valuation of bank equity, we provide evidence that the financial crisis has not altered inve- stors’ attitudes towards bank characteristics. In particular, before, during, and after the crisis, investors in large and systemic U.S. BHCs seemed to penalize leverage, albeit temporarily. Both before and after the crisis, they reward size in the short run. This pattern is appearing only briefly during the crisis. We also show that bank opacity plays no role in market valuation either in the short run or in the long run. Last but not least, we find evidence that stress testing has been informative to the market and that those BHCs that failed at the post-crisis stress tests were not subsequently valued differently by the market.

Keywords: Valuation; Systemic U.S. BHCs; Financial Crisis; Stress testing; Co-integration (search for similar items in EconPapers)
JEL-codes: G01 G10 G21 G28 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2017-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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