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Bank Valuation Research: Experience of the Baltic States

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Author(s): Marius Strumickas | Loreta Valančienė

Journal: Engineering Economics
ISSN 1392-2785

Volume: 4;
Start page: 22;
Date: 2006;
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Keywords: activity analysis | methodologies of banks valuation | valuation effectiveness | multidimensional regression | selection of indicators.

ABSTRACT
The valuation of bank activity is important to shareholders, potential investors, supervisors, government institutions and society. They are interested in safety and profitability of funds invested as well as stable and safe growth of the economy. A lot of theoretical methods ofvaluation exist. The internal valuation of bank usually is concentrated on shareholders’ purpose – increasing of profitability and cash flow. The external valuation is many – sided and especially concentrates on risk. In order to clarify methods, the most useful for valuation and decision making, the investigation was performed.The research showed that methods of internal valuation can be divided into two groups: methods based on cash flow and methods based on profitability measurement. Methods of external valuation can be specified for assets quality, capital adequacy, liquidity, profitability, management and other qualitative factors. As external valuation is much wider, the internal valuation should beimproved by adding necessary fields of appraisal for creation of effective valuation system.
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