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The Valuation Effects of Geographic Diversification: Evidence From U.S. Banks
Author:
Mr. Luc Laeven
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Mr. Martin R. Goetz null

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Mr. Ross Levine null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 050
Language:
English
Publication Date:
01 Feb 2012
DOI:
https://doi.org/10.5089/9781463937119.001
ISBN:
9781463937119
ISSN:
1018-5941
Pages:
35
Keywords:
WP; BHC diversity; bank deregulation; BHC valuation; BHC assets; gravity-deregulation model; Geographic Corporate diversification; Agency problems; Economies of scope; Corporate insiders; Corporate valuation; BHC asset diversification; BHC diversification increase; Estimation techniques; Personal income; Asset valuation; Gravity models; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund