Governance and bank valuation

Gerard Caprio, Luc Laeven and Ross Levine ()

No 3202, Policy Research Working Paper Series from The World Bank

Abstract: Which public policies and ownership structures enhance the governance of banks? The authors construct a new database on the ownership of banks internationally and then assess the ramifications of ownership, shareholder protection laws, and supervisory and regulatory policies on bank valuations. Except in a few countries with very strong shareholder protection laws, banks are not widely held, but rather families or the state tend to control banks. The authors find that: (i) Larger cash flow rights by the controlling owner boosts valuations; (ii) Stronger shareholder protection laws increase valuations; and (iii) Greater cash flow rights mitigate the adverse effects of weak shareholder protection laws on bank valuations. These results are consistent with the views that expropriation of minority shareholders is important internationally, that laws canrestrain this expropriation, and concentrated cash flow rights represent an important mechanism for governing banks. Finally, the evidence does not support the view that empowering official supervisory and regulatory agencies will increase the market valuation of banks.

Keywords: Banks&Banking Reform; International Terrorism&Counterterrorism; Financial Crisis Management&Restructuring; Decentralization; Payment Systems&Infrastructure; Financial Intermediation; Economic Theory&Research; Financial Crisis Management&Restructuring; Banks&Banking Reform; International Terrorism&Counterterrorism (search for similar items in EconPapers)
Date: 2004-02-01
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Governance and bank valuation (2007)
Working Paper: Governance and Bank Valuation (2003)
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