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Determining the value of the equity of a commercial bank Using the price-earnings ratio Bank merger and acquisition pricing Bank earnings and stock prices: Which earnings matter? Deregulation and the value of bank stocks Evidence from market responses to bank M&A announcements
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The market may capitalize operating earnings at a higher multiple than securities gains or losses:
Barth, Beaver, and Wolfson study found that bank stock prices were positively related to operating earnings and negatively related to securities gains and losses. Apparently, the market views securities gains and losses as an attempt by bank management to smooth earnings (which does not fool the market).
Siems study:
No evidence to support diversification and market power motives, as most gains to shareholders from agency, hubris, and agency motives.