Review of Accounting Studies

, Volume 23, Issue 1, pp 200–233 | Cite as

Fundamental analysis of banks: the use of financial statement information to screen winners from losers

  • Partha MohanramEmail author
  • Sasan Saiy
  • Dushyantkumar Vyas


This study investigates the efficacy of a fundamental analysis-based approach to screen U.S. bank stocks. We construct an index (BSCORE) based on fourteen bank–specific valuation signals. We document a positive association between BSCORE and future profitability changes, as well as current and one-year-ahead stock returns, implying that BSCORE captures forward looking information that the markets are yet to impound. A hedge strategy based on BSCORE yields positive hedge returns for all but two years during our 1994–2014 sample period. Results are robust to partitions of size, analyst following, and exchange listing, and persist after adjusting for risk factors. We further document a positive relation between BSCORE and future analyst forecast surprises as well as earnings announcement period returns, and a negative relation between BSCORE and future performance-based delistings. Overall, our results show that a fundamental analysis-based approach can provide useful insights for analyzing banks.


Fundamental analysis Bank stocks Stock screening Market efficiency Financial statement analysis 

JEL classifications

G32 M41 



All errors are our own. We would like to thank the editor Richard Sloan, two anonymous referees, Zahn Bozanic, Patricia Dechow, Urooj Khan, Yaniv Konchitchki, Panos Patatoukas, Chandra Seethamraju, Christine Weidman, Xiao-Jun Zhang, and seminar participants at the University of California-Berkeley, Indian School of Business, London School of Economics, Chinese University of Hong Kong, and City University of Hong Kong for their comments. Partha Mohanram and Dushyant Vyas wish to acknowledge financial support from SSHRC-Canada.


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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Rotman School of ManagementUniversity of TorontoTorontoCanada
  2. 2.School of Accounting and FinanceUniversity of WaterlooWaterlooCanada
  3. 3.Department of ManagementUniversity of TorontoMississaugaCanada

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