Commercial Bank Goodwill Elements Valuation Model And Empirical Research

The question-how much does the bank worth on earth—has been explored repeatedly by every commercial bank,regulators and investment organization in the long term.From the perspectives of external stakeholders,the commercial bank valuation theory can provide methods to discover the value for investment organizations in capital markets,offer value assessment references for analysts to banking industry,and even guide banking regulators with the directions of management.From the internal perspective of the bank,the commercial bank valuation theory can provide the strong stock holders with methods of quantifying own value,assess the performance of business activities,and offer ideas regarding operating decisions and value enhancement for the management.Therefore,the commercial bank valuation theory is continuously developing and modifying,keeping advance with times,which forms a process with complexity and artistry.Due to combination of its complexity and artistry,how to value commercial banks becomes a controversial issue with numerous solutions.This research absorbs and learns from the traditional and current commercial bank valuation theory,carefully analyzes the shortages of current valuation model towards commercial bank valuation,illustrates the shortages of the current DDM valuation which is called the best "theory-corrected",and explores how to set up a logically correct and practical valuation model under the practical conditions.After studying the current corporation valuation theories,the author deeply analyzes the working background of commercial banks and adopts the three-step dividend discount model which is accepted by theorists and the capital markets to value commercial banks,and makes a conclusion that the valuation price of a commercial bank deviates with its market price.The author considers that the commercial bank is an industry working along with risks with variable factors.Caused by asymmetry information,the prognosis made by the market and the management people is hard in full accord.The judgment to the future of banking industry made by the market is not completely correct either.Investors always make adverse selections to market prices because of the weakness of information,leading a great deviation between the market price and the intrinsic value.Without the precondition of supporting by real operation results,banks are hard to make investor to pay real money just based on a expectation—the future operation condition is considered like this.Thus,the data which is based on the reality and is acquirable needs to explore a way of valuation method,which can make "the history will tell the future" in spite of merely depending on the judgment of DDM.By analyzing the operating features of commercial banks,the author discussed the major internal and external factors impacting the value of commercial banks,and summarized the variates impacting the intrinsic value of commercial banks.On the basis of asset appraisal method,this paper puts forward the concept of bank goodwill commonly used in M&A deals,that is,the investment value of investors equals to the bank's net assets plus goodwill premium(the premium may be negative in some cases).Thus inferring out the bank valuation method of goodwill elements and building the panel data model.This paper selected the wide sample data in the "optimal market" to conduct empirical test and inferred that the influence of variates on the bank goodwill is accessible under practical constraints.This research's major contribution is that when the DDM model is correct in theory,yet depending on the individual subjective assumptions in practice,this research introduced the concept of goodwill,thus dismantling the banks' value into Net Asset Value and Goodwill.On the basis of data available in practice,this paper put forward the valuation model of goodwill elements,adopting objective methods to conduct empirical test to the influence on the goodwill of various bank elements.At last,based on the model,this paper pointed out which variate is most helpful to the improvement of the goodwill,and leading to the conclusion,that is,how commercial banks should improve their intrinsic value,how to use the market value management method communicate effectively,so as to make variates themselves better performing in the market,reconciling the market price and the intrinsic value.