Risk Management and Value Creation in ... - Arabictrader.com

48 RISK MANAGEMENT AND VALUE CREATION IN FINANCIAL INSTITUTIONS
SUMMARY
We have seen in this chapter that value maximization is, for banks (as for
all corporations), the ultimate objective—even if there is evidence that bank
stocks underperform on average and that there are other deviating and strong
stakeholder interests. We then went on to define how the terms risk and risk
management will be used in this book and identified the central role of risk
management in banks as well as indicating that it is a likely source for value
creation in banks.
We subsequently presented possible goals of and ways to conduct risk
management in the light of how they can be linked to the ultimate objective,
which is to maximize value. We finally evaluated whether there is empirical
evidence for this link, but recognized that the results are inconclusive and do
not provide detailed answers as to which exact risk-management strategy a
bank should apply in order to increase value.
We will, therefore, explore in the next chapter whether financial theory
offers more detailed answers as to whether banks should conduct risk
management in order to maximize value. So far, we can only observe that
banks are—by their very nature—in the risk business and that they do conduct
risk management as an empirical fact (positive theory for risk management).
We are now trying to find out whether there is also a normative
rationale/theory for risk management.
APPENDIX
Part A: Bank Performance
TABLE 2.2
Bank Performance
BANK NAME (INDEX = 100%
ON January 1, 1992) INDEX ON December 31, 1999
Bank Austria 76.29%
EuroHypo 93.33%
Banca di Roma 101.27%
Natexis bq pop 110.72%
Baden–Württembergische Bank 120.58%
Banesto 126.99%
IKB Deutsche Industriebank 133.13%
Vereins- & Westbank 168.83%
Bankgesellschaft Berlin 171.70%
Okobank 190.15%
Bca. Toscana 193.07%
Bnc. Prtg. Atlantico 214.21%
RheinHyp 215.84%