Do Financial Conglomerates Create or Destroy Economic Value?

Item Type Journal paper
Abstract

This paper investigates whether functional diversification is value-enhancing or value-destroying in the financial services sector, broadly defined. Based on a U.S. dataset comprising approximately 4,060 observations covering the period 1985-2004, we report a substantial and persistent conglomerate discount among financial intermediaries. Our results suggest that it is diversification that causes the discount, and not that troubled firms diversify into other more promising areas. In addition, the discount applies to all financial services activity-areas with the exception of investment banking and is stable over different combinations of financial activity-areas with the exception of commercial banking units combined with insurance companies and/or investment banking activities.

Authors Schmid, Markus & Walter, Ingo
Journal or Publication Title Journal of Financial Intermediation
Language German
Keywords Diversification, Banking, Organizational structure, Financial sector, Firm valuation
Subjects business studies
Institute/School s/bf - Swiss Institute of Banking and Finance
HSG Classification contribution to scientific community
Refereed Yes
Date 1 April 2009
Publisher Elsevier
Place of Publication Amsterdam
Volume 18
Number 2
Page Range 193-216
Number of Pages 24
ISSN 1042-9573
ISSN-Digital 1096-0473
Publisher DOI 10.1016/j.jfi.2008.07.002
Depositing User Prof. Dr. Markus Schmid
Date Deposited 07 Mar 2012 10:54
Last Modified 23 Aug 2016 11:12
URI: https://www.alexandria.unisg.ch/publications/210175

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Citation

Schmid, Markus & Walter, Ingo (2009) Do Financial Conglomerates Create or Destroy Economic Value? Journal of Financial Intermediation, 18 (2). 193-216. ISSN 1042-9573

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https://www.alexandria.unisg.ch/id/eprint/210175
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