![]() ![]() Fair values are measured as the discounted present value of all of the cash flows associated with bank assets and liabilities, not considering the contribution to bank value from government guarantees. We define the fair value of bank equity as the difference between the fair value of all of the bank’s assets and the fair value of all of the bank’s liabilities. ![]() The first component of banks’ market-to-book equity ratios is the ratio of the gap between the fair value of bank equity and the book value of bank equity divided by the book value of bank equity. government guarantees where MVE indicates market value of bank equity, BVE indicates book value of bank equity, and FVE indicates fair value of bank equity. MVE BVE = 1 FVE − BVE BVE franchise value MVE − FVE BVE. Our decomposition can be written simply as Building on this idea, we provide and apply a measurement framework to quantitatively assess the drivers of bank valuation and bank safety using market and accounting data. The key to understanding the difference between book and market measures of bank leverage is a decomposition of the drivers of banks’ market value of equity versus book value of equity into two components, franchise value and the value of government guarantees. Under current regulatory limitations on leverage, the ability of banks to capture the value of government guarantees is constrained, and, as a result, market-to-book ratios are lower. We find that, quantitatively, about half of the elevated market values of banks from the mid-1990s to 2007 arose from the ability of bank equity holders to capitalize the value of the government safety net. In this paper, we provide a decomposition of banks’ market-to-book values into a component driven by bank profitability, or “franchise value,” and a component driven by the value of explicit and implicit government guarantees. Do book or market measures more accurately depict the safety of the US banking system? The answer depends on the quantitative drivers of the difference between the market and book values of bank assets. When you write to the stream, the modifications you make to the entry will appear in the zip archive.Are banks safer today than they were in 2007? Book measures of leverage indicate that regulations postcrisis have shored up the US banking system (see Yellen 2017) however, market measures of leverage and bank credit risk are actually higher than precrisis levels (Sarin and Summers 2016). After retrieving the stream, you can read from or write to the stream. ![]() You use this method to access the stream for an entry in a zip archive. Writer.WriteLine("Information about this package.") Using writer As StreamWriter = New StreamWriter(readmeEntry.Open()) Using archive As ZipArchive = New ZipArchive(zipToOpen, ZipArchiveMode.Update)ĭim readmeEntry As ZipArchiveEntry = archive.CreateEntry("Readme.txt") Using zipToOpen As FileStream = New FileStream("c:\users\exampleuser\release.zip", FileMode.Open) Using (StreamWriter writer = new StreamWriter(readmeEntry.Open())) ZipArchiveEntry readmeEntry = archive.CreateEntry("Readme.txt") Using (ZipArchive archive = new ZipArchive(zipToOpen, ZipArchiveMode.Update)) Using (FileStream zipToOpen = new FileMode.Open)) The following example shows how to create a new entry, open it with the Open method, and write to the stream. The zip archive for this entry has been disposed. ![]()
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