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  • Review of Financial Studies

The Cross Section of Bank Value

By: Mark Egan, Stefan Lewellen and Adi Sunderam
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Abstract

We study the determinants of value creation in U.S. commercial banks. We develop novel measures of individual banks' productivities at collecting deposits and making loans. We relate these measures to bank market values and find that deposit productivity is responsible for about two-thirds of the value of the median bank, as well as the majority of variation in value across banks. We show that variation in productivity is driven by differences across banks in technology, customer demographics, and market power. We also find evidence of synergies between deposit-taking and lending. Our findings suggest that there is significant heterogeneity in banks' abilities to capture value by manufacturing safe assets.

Keywords

Productivity; Banks and Banking; Valuation; Performance Productivity; Value Creation; United States

Citation

Egan, Mark, Stefan Lewellen, and Adi Sunderam. "The Cross Section of Bank Value." Review of Financial Studies 35, no. 5 (May 2022): 2101–2143.
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About The Authors

Mark L. Egan

Finance
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Adi Sunderam

Finance
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More from the Authors
  • Conflicting Interests and the Effect of Fiduciary Duty: Evidence from Variable Annuities By: Mark Egan, Shan Ge and Johnny Tang
  • How Do Investors Value ESG? By: Malcolm Baker, Mark Egan and Suproteem K. Sarkar
  • Shared Models in Networks, Organizations, and Groups By: Joshua Schwartzstein and Adi Sunderam
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