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The Valuation Effects of Geographic Diversification; Evidence From U.S. Banks

Luc Laeven (), Martin Goetz () and Ross Levine ()

No 12/50, IMF Working Papers from International Monetary Fund

Abstract: This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two novel identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduce BHC valuations. These findings are consistent with the view that geographic diversity makes it more difficult for shareholders and creditors to monitor firm executives, allowing corporate insiders to extract larger private benefits from firms.

Keywords: Commercial banks; Corporate governance; Bank regulations; Banking; United States; Geographic Corporate diversification, Agency problems, Economies of scope, Corporate insiders, Corporate valuation, deregulation, bank holding, holding company, bank holding company, Firm Organization and Market Structure, Financial Economics, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-bec and nep-cba
Date: 2012-02-01
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Working Paper: The Valuation Effects of Geographic Diversification: Evidence from U.S. Banks (2011) Downloads
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