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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title An ROE Decomposition Model for Banks
Organization Unit
Authors
  • Stefan Grossmann
Supervisors
  • Alexander Wagner
Institution University of Zurich
Faculty Faculty of Economics, Business Administration and Information Technology
Number of Pages 40
Date 2013
Abstract Text Fundamental financial statement analysis often excludes banks, as their financial statements do not adhere to a standard industrial model. This thesis derives a framework to analyze banks’ financial statements analogously to ROE DuPont decomposition. The framework is evaluated regarding its ability to predict future profitability and future stock return using a fixed effect regression model. Significant improvements in estimating 12 and 24 month-ahead stock performance starting six month after annual closure can be shown by using components instead of ROE. Furthermore, a clear distinction in the importance of certain components for either stock investors or management is observed.
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