Empirical relevance of shareholder value for banks
The concept of shareholder value has gained worldwide acceptance since the constitutional work of Rappaport (1986). Based on the idea that the management’s primary responsibility is to increase value, shareholder value has become not only the standard for measuring business performance, but also an important tool in strategic management. The basis of the shareholder value approach is the assumption that the capital market prices a company’s shares according to the market’s expectations of its long-term productivity, i.e. its sustainable competitive advantage.352 In consequence, a company creates shareholder value by creating sustainable competitive advantage. This basic assumption turns the shareholder value approach into a holistic management approach that links the operating performance of a company to an external market view.
KeywordsPrediction Error Banking Industry Risk Premium Residual Income Bank Size
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