IMF Working Papers

The Valuation Effects of Geographic Diversification: Evidence From U.S. Banks

By Luc Laeven, Martin R. Goetz, Ross Levine

February 1, 2012

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Luc Laeven, Martin R. Goetz, and Ross Levine. The Valuation Effects of Geographic Diversification: Evidence From U.S. Banks, (USA: International Monetary Fund, 2012) accessed December 3, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Asset and liability management, Asset valuation, Banking, Econometric analysis, Estimation techniques, Gravity models, National accounts, Personal income, Population and demographics

Keywords: Agency problems, Asset valuation, Bank deregulation, BHC asset diversification, BHC assets, BHC diversification increase, BHC diversity, BHC valuation, Corporate insiders, Corporate valuation, Economies of scope, Estimation techniques, Geographic Corporate diversification, Global, Gravity models, Gravity-deregulation model, Personal income, WP

Publication Details

  • Pages:

    35

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2012/050

  • Stock No:

    WPIEA2012050

  • ISBN:

    9781463937119

  • ISSN:

    1018-5941

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