Bank performance in Europe and the US: a divergence in market-to-book ratios

Mathieu Simoens and Rudi Vander Vennet

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: Post 2008, the market-to-book ratios of European and US banks have diverged markedly. We use panel regressions to investigate the determinants of the M/B ratios of 112 European and US banks. We show that the underperformance of European banks is mainly driven by non-performing loans and by the negative impact of policy rates on bank interest margins. The higher US bank valuations are mainly driven by higher pro tability and better cost eciency. Our results for European banks stress the importance of timely NPL resolution and imply that low-for-long monetary policy may harm bank health.

Keywords: market-to-book ratio; European banks; US banks; franchise value; bank performance (search for similar items in EconPapers)
JEL-codes: E52 G21 G28 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2019-12
New Economics Papers: this item is included in nep-ban, nep-eec and nep-mac
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Citations: View citations in EconPapers (3)

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http://wps-feb.ugent.be/Papers/wp_19_988.pdf (application/pdf)

Related works:
Journal Article: Bank performance in Europe and the US: A divergence in market-to-book ratios (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:19/988

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