Governance and bank valuation |
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Authors: | Gerard Caprio Luc Laeven Ross Levine |
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Affiliation: | aWilliams College, Economics Department, Williamstown, MA, USA;bInternational Monetary Fund, Washington, DC, USA;cCEPR, UK;dBrown University, Providence, RI, USA;eNBER, USA |
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Abstract: | ![]() This paper assesses the impact of the ownership structure of banks and shareholder protection laws on bank valuations while controlling for differences in bank regulations. Except in a few countries with very strong shareholder protection laws, banks are not widely held. Rather, families or the State control banks. Furthermore, (i) larger cash-flow rights by the controlling owner boost valuations, (ii) stronger shareholder protection laws increase valuations, and (iii) greater cash-flow rights mitigate the adverse effects of weak shareholder protection laws on valuations. These results suggest that ownership structure is an important mechanism for governing banks. |
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Keywords: | Corporate governance Securities law Regulation Banking Financial institutions International finance Market structure |
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