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An overview of commercial banks: performance, regulation, and market value
Author(s) -
Cornett Marcia M,
Tehranian Hassan
Publication year - 2004
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2003.12.002
Subject(s) - financial system , value (mathematics) , business , economics , monetary economics , financial economics , mathematics , statistics
Commercial banks exist because of the various services they provide to sectors of the economy, e.g., information services, liquidity services, transaction cost services, maturity intermediation services, money supply transmission, credit allocation services, and payment services. Failure to provide these services or a breakdown in their efficient provision can be costly to both the ultimate sources (households) and users (firms) of savings, as well as to the overall economy. The affect of a disruption in the provision of the various services on firms, households, and the overall economy when something goes wrong in the commercial banking sector makes a case for the need to monitor performance and market value and to impose regulations that in turn affect bank performance and market value. For example, deterioration in a commercial bank’s performance and value to the point that the bank fails may destroy household savings and at the same time restrict a firm’s access to credit. Further, individual commercial bank failures may create doubts in savers’ minds regarding the stability and solvency of commercial banks in general and cause panics and even runs on sound institutions. Although regulations may be beneficial to households, firms, and the overall economy, they also impose private costs that can affect the performance and market value of commercial banks. This special issue of the journal is devoted to issues examining regulation, performance, and market value of commercial banks. The majority of the papers take a combined look at a specific type of regulation and how the regulation affects the performance and/or market value of commercial banks. Others look more specifically at the impact of a particular regulation on the commercial banking industry as a whole.