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

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  • Jordan, Dan J.
  • Rice, Douglas
  • Sanchez, Jacques
  • Wort, Donald H.
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    Abstract

    This paper examines the market-price to book-value ratio for 6604 bank stock observations from December 31, 2006 through June 30, 2009. We relate each bank's market-price to book-value ratio to several fundamental ratios and whether the bank took funds from the US Treasury under the Troubled Asset Relief Program (TARP). The results of this study show that banks who took TARP funds have lower market-price to book-value ratios. In addition, lower relative costs, higher non-interest income, and lower assets in non-accrual or foreclosed status are associated with higher market-price to book-value ratios while controlling for size and other bank attributes.

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    Bibliographic Info

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

    Volume (Year): 35 (2011)
    Issue (Month): 8 (August)
    Pages: 2047-2055

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:8:p:2047-2055

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

    Related research

    Keywords: Studies Banks Valuation TARP Market-to-book ratio;

    References

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    Cited by:
    1. Cornett, Marcia Millon & Li, Lei & Tehranian, Hassan, 2013. "The performance of banks around the receipt and repayment of TARP funds: Over-achievers versus under-achievers," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 730-746.

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