Determinants of Shareholder Value in European Banking and Shareholder Value Efficiency

Abstract

In Chapter 4, we analysed some of the most common strategies developed since the 1990s to create shareholder value, namely, increasing customer satisfaction, enhancing bank cost and profit efficiencies and increasing productivity. In Chapter 6 we presented various approaches to measure these drivers. The first part of this chapter aims to use the aforementioned measures to see how important they are in describing shareholder value in European banking. In particular, we use estimates of customer satisfaction, cost efficiency, profit efficiency and productivity changes to see how these factors explain shareholder value as shown in Figure 7.1. The approach adopted is similar to that presented in Chapter 5 to test the information content of performance measures. Focusing on the French, German, Italian and UK banking systems over the period 1995–2002, we analyse the value relevance of all these types of efficiency estimates for both listed banks and non-listed banks.