Essays on finance

Drivers of bank performance and the international cost of equity

Joris van Toor

Research output: ThesisDoctoral ThesisScientific

173 Downloads (Pure)

Abstract

This dissertation examines how the way banks function relates to their performance before, during, and after the recent financial crisis in an attempt to understand the causes of that crisis and what we might learn from it. It consists of four substantive chapters, 2-5, preceded by an introductory chapter. Chapter 2 analyzes the role of governance and behavioral dimensions in the ability of the largest U.S. banks to withstand the financial crisis independently. While these banks did not differ in terms of formal governance, I document how differences in certain behavioral dimensions, especially a CEO’s socio-economic background, are related to the banks’ crisis performance. Subsequently, Chapter 3 investigates the relationship between bank returns before and after the financial crisis. In the U.S., I document
that the strong-performing banks from before the crisis have lagged behind since. Moreover, those banks also demonstrated large pre-crisis loan growth. I conclude that pre-crisis winners have been unable to adapt their pre-crisis, high-risk, business model to the post-crisis lower-risk environment. In Europe, by contrast, pre- and post-crisis performance is positively related. In Chapter 4, I shift my attention to bank performance around CEO turnover. In the initial years of a new CEO, bank performance declines, which can be fully explained by an increase in provisions for bad loans. Finally, Chapter 5 considers a firm’s cost of equity in international markets, a firm characteristic that is crucial for banks when valuing firms and assessing their risk profile. My research shows that it matters materially whether an international or national version of the Capital Asset Pricing Model (CAPM) is used to determine the value of the cost of equity. Considering the increased integration of financial markets, I therefore recommend the use of the international CAPM.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
Supervisors/Advisors
  • van Soest, Arthur, Promotor
  • Cools, Kees, Promotor
Award date15 Dec 2017
Place of PublicationTilburg
Publisher
Print ISBNs9789056685409
Publication statusPublished - 2017

Fingerprint

Finance
Bank performance
Cost of equity
Financial crisis
Loans
Capital asset pricing model
Governance
Chief executive officer
Socio-economics
Business model
Financial markets
Bank relationships
Firm characteristics
CEO turnover
Bank crises
International markets

Cite this

van Toor, J. (2017). Essays on finance: Drivers of bank performance and the international cost of equity. Tilburg: CentER, Center for Economic Research.
van Toor, Joris. / Essays on finance : Drivers of bank performance and the international cost of equity. Tilburg : CentER, Center for Economic Research, 2017. 220 p.
@phdthesis{b607ab441bca4f688ce96cfcb7173a1a,
title = "Essays on finance: Drivers of bank performance and the international cost of equity",
abstract = "This dissertation examines how the way banks function relates to their performance before, during, and after the recent financial crisis in an attempt to understand the causes of that crisis and what we might learn from it. It consists of four substantive chapters, 2-5, preceded by an introductory chapter. Chapter 2 analyzes the role of governance and behavioral dimensions in the ability of the largest U.S. banks to withstand the financial crisis independently. While these banks did not differ in terms of formal governance, I document how differences in certain behavioral dimensions, especially a CEO’s socio-economic background, are related to the banks’ crisis performance. Subsequently, Chapter 3 investigates the relationship between bank returns before and after the financial crisis. In the U.S., I documentthat the strong-performing banks from before the crisis have lagged behind since. Moreover, those banks also demonstrated large pre-crisis loan growth. I conclude that pre-crisis winners have been unable to adapt their pre-crisis, high-risk, business model to the post-crisis lower-risk environment. In Europe, by contrast, pre- and post-crisis performance is positively related. In Chapter 4, I shift my attention to bank performance around CEO turnover. In the initial years of a new CEO, bank performance declines, which can be fully explained by an increase in provisions for bad loans. Finally, Chapter 5 considers a firm’s cost of equity in international markets, a firm characteristic that is crucial for banks when valuing firms and assessing their risk profile. My research shows that it matters materially whether an international or national version of the Capital Asset Pricing Model (CAPM) is used to determine the value of the cost of equity. Considering the increased integration of financial markets, I therefore recommend the use of the international CAPM.",
author = "{van Toor}, Joris",
year = "2017",
language = "English",
isbn = "9789056685409",
publisher = "CentER, Center for Economic Research",
school = "Tilburg University",

}

van Toor, J 2017, 'Essays on finance: Drivers of bank performance and the international cost of equity', Doctor of Philosophy, Tilburg University, Tilburg.

Essays on finance : Drivers of bank performance and the international cost of equity. / van Toor, Joris.

Tilburg : CentER, Center for Economic Research, 2017. 220 p.

Research output: ThesisDoctoral ThesisScientific

TY - THES

T1 - Essays on finance

T2 - Drivers of bank performance and the international cost of equity

AU - van Toor, Joris

PY - 2017

Y1 - 2017

N2 - This dissertation examines how the way banks function relates to their performance before, during, and after the recent financial crisis in an attempt to understand the causes of that crisis and what we might learn from it. It consists of four substantive chapters, 2-5, preceded by an introductory chapter. Chapter 2 analyzes the role of governance and behavioral dimensions in the ability of the largest U.S. banks to withstand the financial crisis independently. While these banks did not differ in terms of formal governance, I document how differences in certain behavioral dimensions, especially a CEO’s socio-economic background, are related to the banks’ crisis performance. Subsequently, Chapter 3 investigates the relationship between bank returns before and after the financial crisis. In the U.S., I documentthat the strong-performing banks from before the crisis have lagged behind since. Moreover, those banks also demonstrated large pre-crisis loan growth. I conclude that pre-crisis winners have been unable to adapt their pre-crisis, high-risk, business model to the post-crisis lower-risk environment. In Europe, by contrast, pre- and post-crisis performance is positively related. In Chapter 4, I shift my attention to bank performance around CEO turnover. In the initial years of a new CEO, bank performance declines, which can be fully explained by an increase in provisions for bad loans. Finally, Chapter 5 considers a firm’s cost of equity in international markets, a firm characteristic that is crucial for banks when valuing firms and assessing their risk profile. My research shows that it matters materially whether an international or national version of the Capital Asset Pricing Model (CAPM) is used to determine the value of the cost of equity. Considering the increased integration of financial markets, I therefore recommend the use of the international CAPM.

AB - This dissertation examines how the way banks function relates to their performance before, during, and after the recent financial crisis in an attempt to understand the causes of that crisis and what we might learn from it. It consists of four substantive chapters, 2-5, preceded by an introductory chapter. Chapter 2 analyzes the role of governance and behavioral dimensions in the ability of the largest U.S. banks to withstand the financial crisis independently. While these banks did not differ in terms of formal governance, I document how differences in certain behavioral dimensions, especially a CEO’s socio-economic background, are related to the banks’ crisis performance. Subsequently, Chapter 3 investigates the relationship between bank returns before and after the financial crisis. In the U.S., I documentthat the strong-performing banks from before the crisis have lagged behind since. Moreover, those banks also demonstrated large pre-crisis loan growth. I conclude that pre-crisis winners have been unable to adapt their pre-crisis, high-risk, business model to the post-crisis lower-risk environment. In Europe, by contrast, pre- and post-crisis performance is positively related. In Chapter 4, I shift my attention to bank performance around CEO turnover. In the initial years of a new CEO, bank performance declines, which can be fully explained by an increase in provisions for bad loans. Finally, Chapter 5 considers a firm’s cost of equity in international markets, a firm characteristic that is crucial for banks when valuing firms and assessing their risk profile. My research shows that it matters materially whether an international or national version of the Capital Asset Pricing Model (CAPM) is used to determine the value of the cost of equity. Considering the increased integration of financial markets, I therefore recommend the use of the international CAPM.

M3 - Doctoral Thesis

SN - 9789056685409

PB - CentER, Center for Economic Research

CY - Tilburg

ER -

van Toor J. Essays on finance: Drivers of bank performance and the international cost of equity. Tilburg: CentER, Center for Economic Research, 2017. 220 p.