The Valuation Effects of Geographic Diversification

Download or read book The Valuation Effects of Geographic Diversification written by Mr.Martin R. Goetz and published by International Monetary Fund. This book was released on 2012-02-01 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.