TY  - JOUR
AU  - Caprio,Gerard
AU  - Laeven,Luc
AU  - Levine,Ross
TI  - Governance and Bank Valuation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10158
PY  - 2003
Y2  - December 2003
UR  - http://www.nber.org/papers/w10158
L1  - http://www.nber.org/papers/w10158.pdf
N1  - Author contact info:
Gerard Caprio
World Bank
E-Mail: gerard.caprio@Williams.edu

Luc Laeven
Senior Economist
International Monetary Fund
700 19th Avenue, NW
Washington, DC 20431
Tel: 202/623-9020
Fax: 202/623-4740
E-Mail: Llaeven@imf.org

Ross Levine
Department of Economics
Brown University
64 Waterman Street
Providence, RI 02912
Tel: 401/863-2170
E-Mail: ross_levine@brown.edu
AB  - Which public policies and ownership structures enhance the governance of banks? This paper constructs a new database on the ownership of banks internationally and then assesses the ramifications of ownership, shareholder protection laws, and supervisory/regulatory policies on bank valuations. Except in a few countries with very strong shareholder protection laws, banks are not widely held, but rather families or the State tend to control banks. We find that (i) larger cash flow rights by the controlling owner boosts valuations, (ii) stronger shareholder protection laws increase valuations, and (iii) greater cash flow rights mitigate the adverse effects of weak shareholder protection laws on bank valuations. These results are consistent with the views that expropriation of minority shareholders is important internationally, that laws can restrain this expropriation, and concentrated cash flow rights represent an important mechanism for governing banks. Finally, the evidence does not support the view that empowering official supervisory and regulatory agencies will increase the market valuation of banks.
ER  -