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The determinants of shareholder value in European banking

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  • Fiordelisi, Franco
  • Molyneux, Phil

Abstract

This paper examines the determinants of shareholder value creation for a large sample of European banks between 1998 and 2005. As the recent turmoil in global banking systems has illustrated, bank performance can have a substantial influence on efficient capital allocation, company growth and economic development. We use a dynamic panel data model where the bank's shareholder value is a linear function of various bank-specific, industry-specific and macroeconomic variables. We show that shareholder value has a positive relationship with cost efficiency changes, while economic profits are linked to revenue efficiency changes. Credit losses, market and liquidity risk and leverage are also found to substantially influence bank performance. These results are robust to a variety of different model specifications.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 34 (2010)
Issue (Month): 6 (June)
Pages: 1189-1200

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Handle: RePEc:eee:jbfina:v:34:y:2010:i:6:p:1189-1200

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Shareholder value Efficiency Bank performance Risk-taking EU commercial banks;

References

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Citations

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Cited by:
  1. Fiordelisi, Franco & Soana, Maria-Gaia & Schwizer, Paola, 2013. "The determinants of reputational risk in the banking sector," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(5), pages 1359-1371.
  2. Ugo Albertazzi & Leonardo Gambacorta, 2007. "Bank profitability and taxation," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 649, Bank of Italy, Economic Research and International Relations Area.
  3. Fiordelisi, Franco & Marqués-Ibáñez, David & Molyneux, Phil, 2010. "Efficiency and risk in european banking," Working Paper Series, European Central Bank 1211, European Central Bank.
  4. Nemanja Radić & Franco Fiordelisi & Claudia Girardone, 2012. "Efficiency and Risk-Taking in Pre-Crisis Investment Banks," Journal of Financial Services Research, Springer, Springer, vol. 41(1), pages 81-101, April.
  5. Cipollini, Andrea & Fiordelisi, Franco, 2012. "Economic value, competition and financial distress in the European banking system," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(11), pages 3101-3109.
  6. Amici, Alessandra & Fiordelisi, Franco & Masala, Francesco & Ricci, Ornella & Sist, Federica, 2013. "Value creation in banking through strategic alliances and joint ventures," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(5), pages 1386-1396.
  7. Timothy King & Jonathan Williams, 2013. "Bank Efficiency and Executive Compensation," Working Papers 13009, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  8. Mohsen Afsharian & Anna Kryvko & Peter Reichling, 2011. "Efficiency and Its Impact on the Performance of European Commercial Banks," FEMM Working Papers 110018, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.

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