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Shareholder value in Croatian banking sector

Author

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  • Huljak Ivan

    (Croatian National Bank, Zagreb, Croatia)

Abstract

The view on banks as investments in Croatia is challenged by two phenomena: dual holdings (owners are intensely involved in bank balance sheet as, apart from equity, they provide a significant portion of deposits and loans) and the impediments to determining the cost of equity (as only a handful of banks are traded and with questionable liquidity in the capital market). The paper contributes to the literature by applying the panel regression on the translog cost function in order to calculate the shadow cost of equity for banks in Croatia for the period from 1994 to 2016. In the next step, the Economic Value Added was calculated by taking into account the dual holding role of bank owners. The results suggest that the shareholders economic value is significantly different from the accounting value. In addition, it seems that the standard view that domestic banks are less profitable than foreign banks is only valid from the accounting perspective.

Suggested Citation

  • Huljak Ivan, 2019. "Shareholder value in Croatian banking sector," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 5(1), pages 1-8, May.
    • Handle: RePEc:vrs:crebss:v:5:y:2019:i:1:p:1-8:n:1
    DOI: 10.2478/crebss-2019-0001
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    References listed on IDEAS

    as
    1. Evan Kraft & Richard Hofler & James Payne, 2006. "Privatization, foreign bank entry and bank efficiency in Croatia: a Fourier-flexible function stochastic cost frontier analysis," Applied Economics, Taylor & Francis Journals, vol. 38(17), pages 2075-2088.
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    3. Radić, Nemanja, 2015. "Shareholder value creation in Japanese banking," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 199-207.
    4. Hughes, Joseph P. & Lang, William W. & Mester, Loretta J. & Moon, Choon-Geol & Pagano, Michael S., 2003. "Do bankers sacrifice value to build empires? Managerial incentives, industry consolidation, and financial performance," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 417-447, March.
    5. Yener Altunbas & Santiago Carbo & Edward P.M. Gardener & Philip Molyneux, 2007. "Examining the Relationships between Capital, Risk and Efficiency in European Banking," European Financial Management, European Financial Management Association, vol. 13(1), pages 49-70, January.
    6. Fiordelisi, Franco & Molyneux, Phil, 2010. "The determinants of shareholder value in European banking," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1189-1200, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    banking sector; Croatia; panel regression; shareholder value; translog cost function;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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