Working Paper: NBER ID: w23291
Authors: Mark Egan; Stefan Lewellen; Adi Sunderam
Abstract: We study the determinants of value creation in U.S. commercial banks. We develop novel measures of individual banks’ productivities at collecting deposits and making loans, which we relate to bank market values. We find that deposit productivity is responsible for two-thirds of the value of the median bank and most variation in value across banks. Variation in productivity is driven by differences across banks in technology, customer demographics, and market power. We also find evidence of synergies between deposit-taking and lending. Our findings suggest that there is significant heterogeneity in banks’ abilities to capture value by manufacturing safe assets.
Keywords: bank value; deposit productivity; asset productivity; market-to-book ratio
JEL Codes: G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| deposit productivity (O49) | bank value (G21) |
| asset productivity (G31) | bank value (G21) |
| deposit productivity (O49) | MB (E51) |
| asset productivity (G31) | MB (E51) |
| deposits (G21) | net income (H24) |
| deposit productivity (O49) | variation in bank value (G21) |