Risk Exposure and Bank Valuation: A study on Bangladeshi Commercial Bank

In the business arena particularly in the field of corporate finance, the scope of valuation is highly significant. Within the objective of firm value maximization, the wealth maximization principle is incorporated. Because, among all the measures of a listed firm, the stock price is the most observable indicator that can be applied to assess the performance. In an efficient market, the stock prices of a particular firm immediately reflect all newly disclosed information. Usually, managers’ decisions and actions are continuously compared with stock price performance.

Valuation methods can generally be categorized into asset-, earnings-, and market-based valuation. However, in the last few decades, market-based valuation, which is also known as the shareholder value approach, has turned out to be the leading approach for business performance measurement worldwide. In addition, shareholders’ value maximization is the crucial objective for the managerial decision-making process in different business sectors, including banks. Considering the trust-based business nature, shareholder value creation has become the key goal of leading banks.

This study tried to reveal this vital gap in the existing literature on whether the risk nature could affect the bank valuation in Bangladesh. The specific objectives of this study are-
1.To assess the impact of liquidity risk on bank value.
2.To assess the impact of credit risk on bank value.
3.To assess the impact of interest rate risk on bank value.