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The Cross Section of Bank Value

Listed author(s):
  • Mark Egan
  • Stefan Lewellen
  • Adi Sunderam
Registered author(s):

    We study the determinants of value creation within U.S. commercial banks. We focus on three theoretically-motivated drivers of bank value: screening and monitoring, "safe" deposit production, and synergies between deposit-taking and lending. To assess the relative contributions of each, we develop novel measures of banks' deposit productivity and asset productivity and use these measures to evaluate the cross-section of bank value. We find that variation in deposit productivity explains the majority of variation in bank value, consistent with theories emphasizing safe-asset production. We also find evidence of meaningful value creation from synergies between deposit-taking and lending. Overall, our findings suggest that banks are primarily "special" due to their unique liability structure rather than their ability to screen and monitor borrowers.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23291.

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    Date of creation: Mar 2017
    Handle: RePEc:nbr:nberwo:23291
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