The valuation effects of remittance cost transparency on international money transfer providers

Purpose This study aims to analyze the effect of the remittance prices worldwide (RPW) online remittance cost comparison tool, a major innovation of the World Bank, on the stock prices of dominant money transfer providers and their main bank competitors in emerging markets. Design/methodology/approach The sample comprises three listed dominant money transfer operators and 48 banks and financial service firms that provide remittance services as identified in the RPW tool. The study employs an event study methodology. Findings The results find no valuation impact on major money transfer firms. However, banks did suffer reduced valuations of almost 5% in the remittance business. This represents a reduction of $76,106 million in the market capitalization of the sampled banks. The negative valuation effects are related to bank profitability and are attenuated for banks in countries that have a higher gap between official and black-market foreign exchange rates. Originality/value The RPW tool has significantly impacted at least one part of the remittance market (banks). These findings are consistent with the apparent success of interventions to reduce remittance costs.