Banks and Shareholder Value - An Overview of Bank Valuation and Empirical Evidence on Shareholder Value for Banks

In the German banking sector, management is continually increasing its focus on shareholder interests. This can be seen in the ambitious profitability targets set by management in this sector. Some municipalities are also putting increasing pressure on Landesbanks and saving banks, as members of the largest German banking group, to create greater financial value.

The increasing importance of shareholder value in the banking sector poses a number of questions that are of interest from a scientific perspective. Stephanie Gross analyses three sets of these questions:

• How should economic value creation for shareholders be measured in banking? Does the banking sector have any special features that need to be taken into consideration when measuring this? 
• To what extent do banks’ market values truly reflect expected shareholder value creation? Which factors are responsible for systematic deviations between the intrinsic value of a bank and the market value of a bank? 
• What are the key financial and operational levers that bank managers should focus on in order to increase shareholder value?