NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Cross Section of Bank Value

Mark Egan, Stefan Lewellen, Adi Sunderam

NBER Working Paper No. 23291
Issued in March 2017
NBER Program(s):Corporate Finance

We study the determinants of value creation within U.S. commercial banks. We focus on three theoretically-motivated drivers of bank value: screening and monitoring, "safe" deposit production, and synergies between deposit-taking and lending. To assess the relative contributions of each, we develop novel measures of banks' deposit productivity and asset productivity and use these measures to evaluate the cross-section of bank value. We find that variation in deposit productivity explains the majority of variation in bank value, consistent with theories emphasizing safe-asset production. We also find evidence of meaningful value creation from synergies between deposit-taking and lending. Overall, our findings suggest that banks are primarily "special" due to their unique liability structure rather than their ability to screen and monitor borrowers.

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Document Object Identifier (DOI): 10.3386/w23291

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