Why Bank Market Value to Book Value Ratios so Different : Evidence from Turkish Banking Sector

In this paper we examine the market value to book value ratios for publicly traded banks in Turkish banking sector and investigate whether the bank fundamentals could explain the observed differences among the banks. We find that bank fundamentals play a significant role in explaining the differences in market value to book value ratios. The results reveal that banks with higher profitability and a higher ratio of non-interest revenue to total interest revenue tend to have higher market value to book value ratios. Banks with higher net loans to total assets ratio, a larger asset size, and a higher equity to total assets ratio are expected to have lower market value to book value ratios. We also find that public banks and foreign banks tend to have higher market value to book value ratio whereas participation banks and investment banks tend to have lower valuations