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Market Value of Equity of Croatian Banks

The goal of this article is to analyze the market value of Croatian banks` equity. Market value of equity can be calculated in several ways. The first way of calculating banks` market value of equity is derived from stock market data. The market value of equity of Croatian banks, calculated by this approach, is 2, 18 times higher than the book one. The second way of calculating market value of equity comes from analyzing banking system data on balance sheet structure, interest rate levels, interest rate behavior, current interest rate levels in all included currencies, etc. Modern financial theory makes possible to calculate market values or assumed market values of every financial instrument (independently on marketability of these instruments). This calculation is based on Net Present Value analysis. The market value of equity of Croatian banks, calculated by this approach, is 3, 02 times higher than the book one. Finally, comparing the two market values of equity, the research tries to explain differences in these two models` results. As expected, market value of equity calculated by balance sheet approach is substantially higher than the one calculated by stock market approach.

Market value of equity; interest rate behavior; market value of assets; market value of liabilities

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