The Valuation Effects of Geographic Diversification: Evidence From U.S. Banks
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Summary:
This paper assesses the impact of the geographic diversification of bank holding company (BHC) assets across the United States on their market valuations. Using two novel identification strategies based on the dynamic process of interstate bank deregulation, we find that exogenous increases in geographic diversity reduce BHC valuations. These findings are consistent with the view that geographic diversity makes it more difficult for shareholders and creditors to monitor firm executives, allowing corporate insiders to extract larger private benefits from firms.
Series:
Working Paper No. 2012/050
Subject:
Asset and liability management Asset valuation Banking Econometric analysis Estimation techniques Gravity models National accounts Personal income Population and demographics
English
Publication Date:
February 1, 2012
ISBN/ISSN:
9781463937119/1018-5941
Stock No:
WPIEA2012050
Pages:
35
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