Review on Bank Valuation Approaches with Reference to Developing Economy

The purpose of this paper is an attempt to review of the literature on valuation and its approaches and bank valuation and its approaches applied, from the 1970s to the present. The review of literature is an effort to understand valuation process in Non-financial and financial firm's banks in particular and integration of valuation & bank valuation practices with its approaches, models and techniques. To review most preferred models for bank valuation to be applied in developing economy. Even though there are a growing number of articles surrounding the concept of Valuation and shareholder value maximization, the evidence surrounding this in connection to banks is limited. So the main aim of the research to assess the preferred value drivers and to fit a model for bank valuation from shareholder perspective.

A structured review was conducted of research papers published in reputed International Journals, books and databases.

Very few studies on bank valuation are found in developed countries context and scare study has being found for developing economy context. There is a need of studies focusing on applicability of valuation approaches in banking sector for developing economy like India. The studies are typically limited to a general discussion of theory based on valuation principles and their application to banks, instead of further developing solution on bank-specific valuation issues.

The Review is limited to valuation and bank valuation approaches, with respected to shareholder value creation perspective.

This is one of only a limited number of studies that link bank valuation and best valuation approaches to be used to suit the flexibility and identify the constraints which bank face while valuation. It is the first, we believe, to do this for banks operating in an developing economy like India.