Title The valuation effects of geographic diversification : evidence from U.S. banks / Martin Goetz, Luc Laeven, and Ross Levine

Published [Washington, D.C.] : International Monetary Fund, ©2012

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Description 1 online resource (35 pages) : illustrations Series IMF working paper ; WP/12/50 IMF working paper ; WP/12/50. Contents Cover; Contents; I. Introduction; II. Data and Interstate Bank Deregulation; A. Sources; B. Geographic Diversification; C. Activity Diversity; D. Other Factors; E. Sample Construction; III. Geographic Diversity of BHC Assets and Tobin's q: OLS Results; A. Preliminary Results; B. Robustness Tests with Additional Controls; IV. Instrumental variables: state-time instruments; A. The Time-varying, State-level Instruments; B. First-stage Regression Results and Instrument Validity; C. Second-stage Regression Results with Time-varying, State-level Instruments V. Instrumental Variables: Gravity-deregulation ModelA. Gravity-deregulation Model: Strategy; B. The Gravity-deregulation Model: Two-step Process; C. Results Using BHC Instruments based on the Gravity-deregulation Model; D. Advantages of the Gravity-deregulation Model and the Economic Effects; VI. Conclusions; Figures; 1. The Dynamic Impact of Geographic Expansion on q; 2. Differences in q before (bilateral) Interstate Banking Agreement; Tables; 1. Summary Statistics; 2. Differences between Diversified and Undiversified Bank Holding Companies 3. Geographic Diversification and Bank Holding Company Value4. Geographic Diversification and Bank Holding Company Value: Controls; 5. Geographic Diversification and Bank Holding Company Value: Instrumental Variables based on Interstate Branching Deregulation; 6. The Relationship between Population, Distance and BHC Asset Holdings: Zero-Stage; 7. Geographic Diversification and Bank Holding Company Value: BHC-Specific Instrumental Variables Based on a Gravity-Deregulation Model; References Summary 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 Notes At head of title: Research Department Title from PDF title page (IMF Web site, viewed February 16, 2012) "February 2012." Bibliography Includes bibliographical references Subject Diversification in industry -- United States -- Econometric models Banks and banking -- United States. Valuation -- United States -- Econometric models Banks and banking Diversification in industry -- Econometric models United States Form Electronic book Author Laeven, Luc, author. Levine, Ross, author. International Monetary Fund. Research Department, issuing body. ISBN 9781463937119 1463937113 9781463944971 1463944977 9781463944988 1463944985

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