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The Cross-Section of Bank Value

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  • Mark Egan
  • Stefan Lewellen
  • Adi Sunderam

Abstract

We study the determinants of value creation in U.S. commercial banks. We develop novel measures of individual banks’ productivities at collecting deposits and making loans that we relate to bank market values. We find that deposit productivity is responsible for two-thirds of the value of the median bank and most variation in value across banks. Variation in productivity is driven by differences across banks in technology, customer demographics, and market power. We also find evidence of synergies between deposit-taking and lending. Our findings suggest that there is significant heterogeneity in banks’ ability to capture value by manufacturing safe assets.

Suggested Citation

  • Mark Egan & Stefan Lewellen & Adi Sunderam, 2022. "The Cross-Section of Bank Value," The Review of Financial Studies, Society for Financial Studies, vol. 35(5), pages 2101-2143.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:5:p:2101-2143.
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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