The Cross Section of Bank Value
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.
We thank Anil Kashyap, Henri Servaes, Vania Stavrakeva, Jeremy Stein, Chad Syverson, Vikrant Vig, and participants at Boston College, Brown, Carnegie Mellon, London Business School, and UT Austin for helpful comments. Lewellen thanks the Research and Materials Development Fund at London Business School for financial support. Sunderam gratefully acknowledges funding from the Harvard Business School Division of Research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.