Explaining bank market-to-book ratios: Evidence from 2006 to 2009

Jordan, Dan J.; Rice, Douglas; Sanchez, Jacques; Wort, Donald

doi:10.1016/j.jbankfin.2011.01.017

Cited by 36 publications

(19 citation statements)

References 35 publications

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“…Returns are especially large for firms that suffered from capital depletion during the crisis. In contrast, Jordan et al () find significant negative abnormal returns for up to 10 days following the receipt of funds. However, before receipt of funds, banks experienced significant positive abnormal returns.…”

Section: Literaturementioning

confidence: 86%

The U.S. Treasury's Capital Purchase Program: Treasury's Selectivity and Market Returns Across Weak and Healthy Banks

Carow

Salotti

2014

J of Financial Research

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We evaluate firms that voluntarily participated in the Treasury's Capital Purchase Plan (CPP), focusing on the market impact of their decision to participate. For healthy firms, abnormal stock returns are negative. For weak firms, CPP was a cheap source of funding, as demonstrated by their significant positive returns. Despite gains for weak firms, not all were permitted to participate. The Treasury made funding available to institutions with low levels of capital only if they also had better performing loan portfolios. Providing further evidence of the Treasury's selectivity, weak firms not participating in the CPP had significantly lower long‐term returns than did weak firms that participated.

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Section: Literaturementioning

confidence: 86%

The U.S. Treasury's Capital Purchase Program: Treasury's Selectivity and Market Returns Across Weak and Healthy Banks

Carow

Salotti

2014

J of Financial Research

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“…The price-to-book-value ratio is a proxy to growth opportunities (Fama and French, 2000), and a predictor of returns on equity (Beaver and Ryan, 2000;Capaul et al, 1993). Specifically, banks with higher price-to-book are more profitable, deliver faster growth in deposits and total assets, are more cost efficient, and present better solvency ratios (Jordan, et al, 2011). Intangible assets such as digitalization and CS, underly the relationship between price-to-book and performance (Trueman et al, 2000).…”

Section: Dependent Variablesmentioning

confidence: 99%

The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

2020

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We analyse the implications for international banks of two contemporary megatrends: corporate sustainability (CS) and digitalization. The digital environment and the availability of massive data from customers generate asymmetric information for banks to the detriment of customers, who experience individual vulnerabilities such as privacy rights. This can hinder the positive influence of digitalization in banks' performance, with relevant managerial and political implications. In this context, the reputation generated by CS strategies can constitute a credence factor that reduces customers' fears of opportunistic behavior and information asymmetries. We test and find support for our hypothesis over a panel data of large international banks from developed countries. Our findings shed light on the mutual reinforcement of CS and digitalization strategies in enhancing banks' market performance and efficiency. Policy Implications• Our study shows that digitalization requires the complementary action of CS-based reputation to enhance banks' performance. This suggests the need for reputation building in those sectors (public and private) immersed in the digital transformation. By doing so, organizations can reduce information asymmetries for their main stakeholders. Since CS efforts exhibit an important potential for building organizational reputation, governments should stimulate the firms' CS investments.• Banks' survival against disruptive forces urges to reconsider the basis of its business model. It is not sufficient to react against digital-born companies' menace with M&A-driven strategies. For that reason, we suggest that including CS in the basis of the banking business model can contribute to achieving better market performance and efficiency and to overcoming fierce competition by new entrants.

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“…Secondly, we analyze the market reaction of a regulatory change on stock volatility and not on bond yields, as the majority of these kinds of studies does (for instance, see the references reported above). We follow Jordan et al (2011) in the analysis of the effect of a government intervention on stock market prices. However, compared to Jordan et al (2011): (i) the analysis is, obviously, on bail-in and not on the TARP and consequently on EU banks and not on US banks (and in a different time span); (ii) the dependent variable is the stock price volatility and not the price to book value ratio.…”

Section: Empirical Papers On Changes In Banking Regulationmentioning

confidence: 99%

European Significant Bank Stock Market Volatility: Is there a Bail-In Effect?

Leone¹,

Porretta²,

Riccetti³

2019

IJBM

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In 2016 the “bail-in” tool, set by the European Bank Recovery and Resolution Directive (BRRD), started to enter into force: shareholders of European banks lose their money in the case of bank rescue. Before the “bail-in” mechanism was introduced, governments often performed bail-out of distressed banks. The larger risk born by shareholders can be observed in the growth of stock market volatility. We implement a panel data analysis on a sample of large European banks and find that in 2016 stock market volatility changes in a way that is theoretically consistent with the introduction of the “bail-in”. Moreover, Italy shows an even higher volatility, probably due to retail investors owning bank shares, who could have understood the risk only after the burden sharing of four Italian banks in November 2015. These findings can be a warning about market efficiency, with implications for the systemic risk of a “bail-in” procedure.

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Explaining bank market-to-book ratios: Evidence from 2006 to 2009

Cited by 36 publications

References 35 publications

The U.S. Treasury's Capital Purchase Program: Treasury's Selectivity and Market Returns Across Weak and Healthy Banks

The U.S. Treasury's Capital Purchase Program: Treasury's Selectivity and Market Returns Across Weak and Healthy Banks

The Impact of Corporate Sustainability and Digitalization on International Banks’ Performance

European Significant Bank Stock Market Volatility: Is there a Bail-In Effect?

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