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Bank performance in Europe and the US : a divergence in market-to-book ratios

Mathieu Simoens (UGent) and Rudi Vander Vennet (UGent)
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Abstract
In the 2007–2017 period, the market-to-book ratios of European and US banks diverged markedly. We use panel regressions to investigate the determinants of M/B ratios for 112 European and US banks. We show that higher US valuations were driven by profitability and cost efficiency. The underperformance in Europe was associated with declines in the net interest margin and low policy rates, as well as with inadequate resolution of non-performing loans and an increasing share of deposits. Our results stress the importance of provisioning and NPL resolution in Europe. Moreover, low-for-long policy rates may be detrimental for bank franchise values.
Keywords
Finance, Market-to-book ratio, European banks, US banks, Franchise value, Bank performance

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MLA
Simoens, Mathieu, and Rudi Vander Vennet. “Bank Performance in Europe and the US : A Divergence in Market-to-Book Ratios.” FINANCE RESEARCH LETTERS, 2021, doi:10.1016/j.frl.2020.101672.
APA
Simoens, M., & Vander Vennet, R. (2021). Bank performance in Europe and the US : a divergence in market-to-book ratios. FINANCE RESEARCH LETTERS. https://doi.org/10.1016/j.frl.2020.101672
Chicago author-date
Simoens, Mathieu, and Rudi Vander Vennet. 2021. “Bank Performance in Europe and the US : A Divergence in Market-to-Book Ratios.” FINANCE RESEARCH LETTERS. https://doi.org/10.1016/j.frl.2020.101672.
Chicago author-date (all authors)
Simoens, Mathieu, and Rudi Vander Vennet. 2021. “Bank Performance in Europe and the US : A Divergence in Market-to-Book Ratios.” FINANCE RESEARCH LETTERS. doi:10.1016/j.frl.2020.101672.
Vancouver
1.
Simoens M, Vander Vennet R. Bank performance in Europe and the US : a divergence in market-to-book ratios. FINANCE RESEARCH LETTERS. 2021;
IEEE
[1]
M. Simoens and R. Vander Vennet, “Bank performance in Europe and the US : a divergence in market-to-book ratios,” FINANCE RESEARCH LETTERS, 2021.
@article{8668849,
  abstract     = {{In the 2007–2017 period, the market-to-book ratios of European and US banks diverged markedly. We use panel regressions to investigate the determinants of M/B ratios for 112 European and US banks. We show that higher US valuations were driven by profitability and cost efficiency. The underperformance in Europe was associated with declines in the net interest margin and low policy rates, as well as with inadequate resolution of non-performing loans and an increasing share of deposits. Our results stress the importance of provisioning and NPL resolution in Europe. Moreover, low-for-long policy rates may be detrimental for bank franchise values.}},
  articleno    = {{101672}},
  author       = {{Simoens, Mathieu and Vander Vennet, Rudi}},
  issn         = {{1544-6123}},
  journal      = {{FINANCE RESEARCH LETTERS}},
  keywords     = {{Finance,Market-to-book ratio,European banks,US banks,Franchise value,Bank performance}},
  language     = {{eng}},
  title        = {{Bank performance in Europe and the US : a divergence in market-to-book ratios}},
  url          = {{http://dx.doi.org/10.1016/j.frl.2020.101672}},
  year         = {{2021}},
}

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