engleski

What determines the price to book ratio in the banking industry

Price to book ratio measures the relative net value of a firm compared to market value and is one of the essential indicators for estimation of assets value and income capacities. This paper analyses the movement and determinants of price to book ratio of European banks. The research sample consists of 23 publicly listed market making banks operating in the period from 2002 to 2017 selected by assets size and free float of market shares. For that purpose, the dynamic panel data models are estimated by utilizing the system Generalized Method of Moments. Empirical evidence shows that price to book ratios of European banks are related to the credit quality of bank loans, bank income structure and regulatory measures requirements. The conclusion of the paper emphasizes the risk of low price to book ratio of the European banking industry in the post-crisis period and opportunities to regulatory capital arbitrage.

price to book ratio, regulatory requirements, credit risk portfolio, dynamic panel models

nije evidentirano