Publication: Governance and Bank Valuation
Date
2004-02
ISSN
Published
2004-02
Author(s)
Caprio, Gerard
Laeven, Luc
Levine, Ross
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 can restrain 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.
Link to Data Set
Citation
“Caprio, Gerard; Laeven, Luc; Levine, Ross. 2004. Governance and Bank Valuation. Policy Research Working Paper;No.3202. © World Bank, Washington, D.C.. http://hdl.handle.net/10986/14726 License: CC BY 3.0 IGO.”
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