Value-based management in banking: The effects on shareholder returns
In this study, we explore the drivers of total shareholder returns (TSR) in commercial banks, and investigate whether banks subscribing to Value-based Management (VBM) outperform the non-adopters in terms of TSR. We estimate a TSR model using data from 132 listed commercial European and North Americ...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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International Journal of Business Science and Applied Management
2020-07-01
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| Series: | International Journal of Business Science and Applied Management |
| Subjects: | |
| Online Access: | https://www.business-and-management.org/paper.php?id=134 |
| _version_ | 1818428654360723456 |
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| author | Christian Schmaltz Rainer Lueg Jesper Agerholm Kasper Wittrup |
| author_facet | Christian Schmaltz Rainer Lueg Jesper Agerholm Kasper Wittrup |
| author_sort | Christian Schmaltz |
| collection | DOAJ |
| description | In this study, we explore the drivers of total shareholder returns (TSR) in commercial banks, and investigate whether banks subscribing to Value-based Management (VBM) outperform the non-adopters in terms of TSR. We estimate a TSR model using data from 132 listed commercial European and North American banks. First, we demonstrate that banks that have publicly adopted VBM in their operative Management Control Systems (MCS) outperform non-VBM-banks. On average, VBM-adopters generate a 5.8%-points higher annual TSR. They also outperform non-VBM-banks in terms of profitability, growth, and liquidity. Second, we find that banks focus on key performance indicators (KPIs) such as the cost-income ratio, which are sub-optimal indicators of TSR. We suggest the implementation of indicators that are more closely related to TSR, such as return on assets or loan loss provisioning. So far, only a few banks (10%-45%) have considered these KPIs in their MCS. A shift towards our suggested KPIs might even further improve the performance of VBM-adopters. Controlling for macro-economic factors, our findings are stable before and after the financial crisis in 2008. |
| first_indexed | 2024-12-14T15:05:03Z |
| format | Article |
| id | doaj.art-5666e5b092b448dba7f4c3351e3ac79e |
| institution | Directory Open Access Journal |
| issn | 1753-0296 1753-0296 |
| language | English |
| last_indexed | 2024-12-14T15:05:03Z |
| publishDate | 2020-07-01 |
| publisher | International Journal of Business Science and Applied Management |
| record_format | Article |
| series | International Journal of Business Science and Applied Management |
| spelling | doaj.art-5666e5b092b448dba7f4c3351e3ac79e2022-12-21T22:56:43ZengInternational Journal of Business Science and Applied ManagementInternational Journal of Business Science and Applied Management1753-02961753-02962020-07-011412550Value-based management in banking: The effects on shareholder returnsChristian Schmaltz0Rainer Lueg1Jesper Agerholm2Kasper Wittrup3Department of Economics and Business Economics, Aarhus University Fuglesangs Allé4, Aarhus, 8210 V, Denmark Email: chsch@asb.dkProfessor for Managerial Accounting Institute of Finance and Accounting, Leuphana University Universitätsallee 1, 21335 Lüneburg, GermanyClearwater International Dalgas Ave 48, 8000 Aarhus, Denmark Email: jesper.agerholm@cwicf.comHildebrandt & Brandi Esplanaden 7, 1263 København K, Denmark Email: kw@hildebrandtbrandi.comIn this study, we explore the drivers of total shareholder returns (TSR) in commercial banks, and investigate whether banks subscribing to Value-based Management (VBM) outperform the non-adopters in terms of TSR. We estimate a TSR model using data from 132 listed commercial European and North American banks. First, we demonstrate that banks that have publicly adopted VBM in their operative Management Control Systems (MCS) outperform non-VBM-banks. On average, VBM-adopters generate a 5.8%-points higher annual TSR. They also outperform non-VBM-banks in terms of profitability, growth, and liquidity. Second, we find that banks focus on key performance indicators (KPIs) such as the cost-income ratio, which are sub-optimal indicators of TSR. We suggest the implementation of indicators that are more closely related to TSR, such as return on assets or loan loss provisioning. So far, only a few banks (10%-45%) have considered these KPIs in their MCS. A shift towards our suggested KPIs might even further improve the performance of VBM-adopters. Controlling for macro-economic factors, our findings are stable before and after the financial crisis in 2008.https://www.business-and-management.org/paper.php?id=134value-based managementbankstotal shareholder returnvalue drivers |
| spellingShingle | Christian Schmaltz Rainer Lueg Jesper Agerholm Kasper Wittrup Value-based management in banking: The effects on shareholder returns International Journal of Business Science and Applied Management value-based management banks total shareholder return value drivers |
| title | Value-based management in banking: The effects on shareholder returns |
| title_full | Value-based management in banking: The effects on shareholder returns |
| title_fullStr | Value-based management in banking: The effects on shareholder returns |
| title_full_unstemmed | Value-based management in banking: The effects on shareholder returns |
| title_short | Value-based management in banking: The effects on shareholder returns |
| title_sort | value based management in banking the effects on shareholder returns |
| topic | value-based management banks total shareholder return value drivers |
| url | https://www.business-and-management.org/paper.php?id=134 |
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