Value-Driving Activities in Euro-Zone Banks (original) (raw)

The paper develops and tests accounting-based valuation models for commercial banks. Based on Begley et al. (2006) framework we propose a valuation model where goodwill is generated by virtually all commercial and investment banking activities. Key features of our model are: developing a relationship between the stream of future cash flows from fee income and value that depends on lending, borrowing and off-balance sheet business; and allowing proprietary investment and trading securities to be positive net present value activities.