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

45 Pages Posted: 17 Dec 2011

See all articles by Martin Richard Goetz

Martin Richard Goetz

Goethe University Frankfurt

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2011

Abstract

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.

Suggested Citation

Goetz, Martin Richard and Laeven, Luc A. and Levine, Ross Eric, The Valuation Effects of Geographic Diversification: Evidence from U.S. Banks (December 2011). NBER Working Paper No. w17660, Available at SSRN: https://ssrn.com/abstract=1973871

Martin Richard Goetz (Contact Author)

Goethe University Frankfurt ( email )

Theodor W Adorno Platz 4
Frankfurt, 60323
Germany

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
17
Abstract Views
531
PlumX Metrics