Atkeson, Andrew G. <br/><br/>
Government Guarantees and the Valuation of American Banks / 
Andrew G. Atkeson, Adrien d'Avernas, Andrea L. Eisfeldt, Pierre-Olivier Weill. 
 - Cambridge, Mass.  National Bureau of Economic Research  2018. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w24706 .
 - Working Paper Series (National Bureau of Economic Research)  no. w24706. .
<br/><br/> June 2018. 
<br/><br/> Banks' ratio of the market value to book value of their equity was close to 1 until the 1990s, then more than doubled during the 1996-2007 period, and fell again to values close to 1 after the 2008 financial crisis. Sarin and Summers (2016) and Chousakos and Gorton (2017) argue that the drop in banks' market-to-book ratio since the crisis is due to a loss in bank franchise value or profitability. In this paper we argue that banks' market-to-book ratio is the sum of two components: franchise value and the value of government guarantees. We empirically decompose the ratio between these two components and find that a large portion of the variation in this ratio over time is due to changes in the value of government guarantees. 
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